WASHINGTON — Some Federal Reserve officials are open to raising the
amounts of mortgage and Treasury securities purchase programs beyond
the $1.75 trillion that they have already committed to buying,
according to minutes from the Fed’s April meeting.


Officials, meanwhile, projected an even deeper recession than they
expected three months earlier and a more sluggish recovery over the
next two years as labor markets remain under pressure.

“Some
members noted that a further increase in the total amount of purchases
might well be warranted at some point to spur a more rapid pace of
recovery,” according to the minutes of the April 28-29 meeting,
released Wednesday with the usual lag. (Read the full minutes.)

As widely expected, the Fed kept the target federal funds for
interbank lending in a range near zero at that meeting. In a statement,
officials said rates will stay “exceptionally low…for an extended
period” suggesting rates could stay where they are into next year.

Policymakers also said in the policy statement three weeks ago that
the economic outlook had improved “modestly” in the weeks since their
March meeting, fanning hopes that the recession is in its final stages.
Economic data have been mixed since late April, though, with some signs
of stability in consumer and business surveys offset by ongoing
weakness in spending and employment.

Data since the March FOMC meeting “provided some tentative evidence
that the pace of contraction in real economic activity was starting to
diminish,” according to the April minutes, citing “strengthened”
financial conditions and indications of a pickup in household and
business confidence.

Fed staff economists, meanwhile, revised up their projections for
the economy in the second half of this year and 2010, “with real GDP
expected to edge higher in the second half and then increase moderately
next year.”

Still, quarterly economic projections included in the April meeting
minutes highlight just how much the economic outlook had eroded since
the beginning of the year. Fed officials see the economy contracting
between 1.3% and 2% this year, versus forecasts for only a 0.5%-1.3%
decline in January.

Gross domestic product is only expected to advance 2% to 3% next
year, which is below what officials thought in January. They also
downgraded their 2011 forecasts, though they are still centered around
a solid 3.5% to 4.8% rate of growth.

The unemployment rate is expected to end 2009 between 9.2% and 9.6%,
significantly higher than what officials expected in January. One
official expects it to reach 10% this year. It’s expected to stay above
9% in 2010, too.

Inflation should remain “subdued,” the Fed said, although many officials thought the risk of deflation “had diminished.”

The suggestion in the minutes that some officials think more asset
purchases may be in the offing should cheer those on Wall Street that
were disappointed when the Fed kept the size of their mortgage-related
and Treasury security purchase programs unchanged last month at $1.45
trillion and $300 billion, respectively.

The FOMC “discussed its strategy for communicating the anticipated
path of its asset purchases and the circumstances under which
adjustments to that path would be appropriate,” according to the
minutes.

“All members agreed that the statement should note that the timing
and overall amounts of the Committee’s asset purchases would continue
to be evaluated in light of the evolving economic outlook and
conditions in financial markets,” the minutes stated.

Officials also signaled that while they are open to more
transparency, they are also unlikely to name names when it comes to the
banks that use the Fed’s lending facilities.

“It was noted that disclosing the identities of individual borrowers
would very likely discourage use of the Federal Reserve’s liquidity and
credit facilities,” the Fed said.