Fed Panel Voted for Delayed Tightening Of Credit, Report on May Meeting Says
WASHINGTON -- In an unusual move, the Federal Reserve's policy-setting committee voted 9-2 at its May 17 meeting to leave credit conditions unchanged initially but to tighten after a short interval.</br></br>The slight firming, which occurred before the end of the month, was to take place unless economic and financial-market conditions "were to differ markedly" from expectations, according to minutes of the meeting of the Federal Open Market Committee. The move was the third tightening by the central bank this year.</br></br>Moreover, the committee members leaned toward a further firming. The panel decided that before its next meeting, "some added reserve restraint would be acceptable, or some slight lessening of reserve pressure might be acceptable, depending on ongoing economic and financial developments." Since the meeting, the Fed has indicated it has made no significant changes in policy, but it has appeared to be willing to err slightly on the side of a tighter policy.</br></br>The minutes were released after the customary delay of six to eight weeks. The committee held another meeting last week. Minutes of that meeting won't be released until next month.</br></br>The panel's May move toward tighter credit reflected a perceived need "to counter the risks of rising inflationary pressures in the economy," the minutes said, and a view that a failure to act would mean more stringent steps would be needed later. The members said the economy remained strong, with unemployment relatively low and factories using a rising percentage of available capacity.