Directors at the Federal Reserve’s regional banks said at their September and October meetings that they saw more signs of stronger U.S. housing, a rise in consumer spending and gains in energy and agriculture.
“Most directors observed further signs of recovery in the housing sector, including growth in construction and sales,” according to minutes released today in Washington summarizing the discussions. Several directors said “consumer spending had picked up, most notably for automobiles” while some said the “energy and agricultural sectors had remained strong.”
Manufacturing “was generally judged to have weakened” and economic activity was “mixed” across specific industries, board members of the 12 reserve banks said, the minutes show. Directors maintained their outlook for “moderate economic growth over the coming months” and noted that businesses face uncertainty about a potential U.S. fiscal contraction known as the fiscal cliff and the slowing global economy.
“Businesses continued to be cautious about hiring and investing, largely in response to domestic fiscal and regulatory uncertainty and downside risks associated with strains in global financial markets,” the minutes show.
The Federal Open Market Committee is scheduled to meet Dec. 11-12 after expanding record stimulus in September with an announcement of new bond buying. It maintained the policy at the Oct. 23-24 meeting. Policy makers have one 2012 meeting left to decide whether to extend Operation Twist, the program to extend the maturity of securities in the Fed’s portfolio. Operation Twist expires in December.
Recommendations about changing the discount rate, which has been at 0.75 percent since February 2010, were similar to those at earlier meetings. The Boston Fed’s directors urged a quarter- percentage point reduction, to 0.5 percent, while the Kansas City Fed repeated its request for a quarter-point rise to 1 percent. The other 10 banks didn’t request a change.
Chairman Ben S. Bernanke said in a speech in New York today that an agreement on cutting federal budget deficits could remove an impediment to growth, while failure to avoid the fiscal cliff would pose a “substantial threat” to the recovery.
The fiscal cliff refers to $607 billion of tax increases and spending cuts that will automatically come into force at the beginning of 2013 unless lawmakers act.
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