The US Federal Reserve's monetary-policy panel decided on its half-percentage point rate cut in November as the best way to cut short a "soft spot" in economic growth, according to minutes of the meeting released last night .
"A relatively aggressive easing action could help to ensure that the current soft spot in the economy would prove to be temporary and enhance the odds of a robust rebound in economic activity next year," according to minutes of the November 6th meeting of the Federal Open Market Committee (FOMC).
The FOMC voted 12-0 to cut rates by a larger-than-expected amount at the meeting and said the risks to the economy were balanced between inflation and weakness. The minutes said the decision to move to a neutral economic assessment was meant to lower the odds of financial markets overreacting to the rate move.
Although the FOMC members said fiscal policy has eased worries that a dwindling supply of US Treasury debt could constrain Fed monetary operations, they also directed the staff to continue studying the use of mortgage-backed securities issued by the Government National Mortgage Association, "Ginnie Maes," for possible use "at some point in the future".
At the FOMC's most recent meeting on Tuesday, the panel voted unanimously to leave rates steady and said there were signs the economy was moving out of its slump.