“A substantial easing” of monetary policy was warranted at the March 18 Federal Open Market Committee, as most members believed the economic outlook “weakened considerably since the January meeting, and members viewed the downside risks to economic growth as having increased,” according to minutes of the meeting released yesterday.

“Indeed, some believed that a prolonged and severe economic downturn could not be ruled out given the further restriction of credit availability and ongoing weakness in the housing market,” the minutes noted. “Members recognized that monetary policy alone could not address fully the underlying problems in the housing market and in financial markets, but they noted that, through a range of channels, lower short-term real interest rates should help buoy economic activity and ameliorate strains in these markets.”

The panel also expects inflation to moderate in coming quarters, but current inflation pressures rose despite a weaker outlook for growth, making “appropriately calibrating the stance of policy … difficult, partly because some time would be required to assess the effects of the substantial easing of policy to date.”

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