Stimulus stumbles as tighter credit fears hits US stocks
US Federal Reserve chairman Ben Bernanke may have to overcome divisions among policy-makers should he seek to maintain record stimulus beyond June, minutes of the Fed's March 15 meeting indicate.
A "few" among the central bank's 17 governors and regional bank presidents said tighter credit may be warranted this year, while a "few others noted that exceptional policy accommodation could be appropriate beyond 2011," the Federal Open Market Committee (FOMC) said in the minutes, released yesterday in Washington.
Stocks and Treasuries fell on speculation the Fed may start to tighten policy sooner than forecast after it completes its $600bn (€418bn) bond-purchase programme in June.
A mixed bag of economic indicators, including higher food and energy prices and a slowing expansion in service industries, make Bernanke's job tougher, said Keith Hembre, a former Fed researcher.
"You've got lower-than-desired growth and the potential for higher-than-desired inflation here, and it definitely complicates the picture from a policy standpoint," said Hembre, investment strategist in Minneapolis at Nuveen Asset Management, which oversees about $197bn.
Several FOMC members "indicated, in light of recent developments, that the risks to their forecasts of inflation had shifted somewhat to the upside," the minutes said.
Since the March FOMC meeting, reports showed the labour market and inflation have picked up, while consumer confidence slipped and new home sales dropped to a record low. Some regional Fed presidents who were sceptical of stimulus have talked about the need to tighten credit, and Bernanke has yet to indicate his preference for the Fed's next move.