Fed Was Leaning toward Lower Rates in Late August Despite Inflation Worry
WASHINGTON -- The Federal Reserve confirmed that it was leaning toward lower interest rates in late August despite concern that surging oil prices might rekindle inflation.</br></br>The Fed hasn't made any policy move since late July. But Fed Chairman Alan Greenspan signaled last week that interest rates are likely to come down if Congress approves a substantial deficit-reduction package. Bush administration officials have said they don't expect the Fed to act until after a package is adopted.</br></br>At its Aug. 21 meeting, the Fed's policy-setting open-market committee voted to hold its grip on credit steady, but to lean toward an easier policy, according to a summary released after the customary six-week lag. The committee met again last week.</br></br>"A majority . . . indicated a preference for a directive that was tilted toward potential easing," the summary said. "Some . . . indicated that they had been leaning toward an easing move prior to the events in the Middle East, and they now felt that" credit conditions "should be eased promptly if conditions in domestic financial and foreign exchange markets provided an appropriate opportunity."</br></br>Several members anticipated events would "unfold in a direction that would require an easing," though they cautioned that the timing "would have to be weighed carefully."