WASHINGTON — Some Federal Reserve officials pushed in August for a more aggressive response to the economy’s slowdown.

They settled for a plan to keep rates near zero for another two years and won agreement to discuss more options at an extended meeting in September.

Minutes of the Aug. 9 policy meeting released Tuesday show that Fed officials discussed a range of actions, including another round of Treasury bond purchases. Some Fed officials said a weaker economy called for such a step.

Fed officials in the end said they planned to keep rates low until at least mid-2013, assuming the economy remained weak. They also added a second day to their September meeting. That raised speculation that the Fed would announce some further action after that meeting.

Stocks rose modestly after the minutes were released after being down most of the day. The Dow Jones industrial average closed up 20 points for the day. Broader indexes also gained.

The minutes show Fed officials discussed the two-year plan to keep interest rates near zero, a third round of bond purchases, and shifting the mix of the Fed’s holdings into long-term Treasury securities. Some also raised the idea of tying record-low interest rates to a level of unemployment or inflation, instead of the set time period.

The bond purchases are intended to keep long-term rates low and aid the economy. The second round of bond purchases, announced last year, sparked a 28 percent rally in the Dow through April 29.

Three Fed members opposed including a two-year timeframe in the August statement. The 7-3 vote after the meeting marked the first time in nearly 20 years that at least three members dissented from a Fed statement.

The minutes also show that “some participants” made the case that any additional stimulus at this time could fuel inflation. The minutes do not identify members by name.

David Jones, chief economist at DMJ Advisors, a Denver-based consulting firm, said the minutes indicated Fed officials were leaning toward replacing short-term securities with longer-term securities, rather than launching a third round of bond buying.

 

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