Fed Minutes Cite Concern Over Economic Contraction
Federal Reserve officials anticipated that the U.S. economy will shrink in the first half of the year, while noting concerns about a possible “prolonged and severe economic downturn,” when they cut interest rates last month, according to the minutes of the meeting released Tuesday.
“Many participants thought some contraction in economic activity in the first half of 2008 now appeared likely,” the Fed said in minutes of the March 18 Federal Open Market Committee meeting.
At the meeting, the Fed cut the federal funds interest rate by three-quarters of a point, to 2.25%.
The minutes encompass a period when Chairman Ben Bernanke invoked rarely used authority to provide emergency financing for investment banks and rescued Bear Stearns Cos. from bankruptcy, Bloomberg reported.
Officials are seeking to limit the impact on the broader economy of what former Fed chief Alan Greenspan Tuesday termed the worst credit crisis in 50 years, Bloomberg said.
“Some believed that a prolonged and severe economic downturn could not be ruled out,” the minutes stated.
