US Federal Reserve officials feared a lack of further fiscal stimulus would jeopardize an economic recovery that was developing faster than expected, according to minutes released Wednesday of the central bank's September meeting.
The Federal Open Market Committee released minutes of its September 15-16 meeting on Wednesday. The Fed's political arm kept rates stable at the meeting and approved a language that outlined the new approach to inflation.
The protocol described the recovery in GDP as "rapid" at the time.
The meeting included an extensive discussion of the economic outlook, as members said the economy was doing better than expected, in large part because of the fiscal aid provided by Washington.
That support is at risk as talks between the White House and Congressional Democrats have collapsed and may not resume before the November election.
"Many participants noted that their economic outlook required additional fiscal support and that the pace of recovery could be slower than expected if future fiscal support was significantly lower or came much later than expected," the meeting summary said .
Small businesses and farmers have been strengthened by the support, officials said amid an economy that had regained more jobs than expected by August.
"The lack of further financial support would exacerbate economic difficulties in minority and low-income communities," the protocol said.
While the committee discussed economic conditions, members adopted recent changes in the Fed's approach to inflation and the requirements for future rate hikes.
The markets have been looking for improved guidance on what specific benchmarks the FOMC would use as criteria. However, members said the new language, which states an inflation target averaging over 2% over a period of time, would be sufficient.
"Most participants were in favor of providing more explicit results-oriented guidance on federal policy rates, including setting criteria for raising federal policy rates above [current near zero levels] in relation to paths to employment or inflation or both," says it said in the minutes. "With longer-term interest rates already very low, it didn't seem necessary at this point to improve the forecast forward or to expand the forecast forward to put additional pressure on returns."
The Fed had previously expressed its inflation target as "symmetrical," meaning it would go above or below the 2% target. Members believe that the new language makes it clearer that the Fed is aiming for at least 2% inflation.