Fed Sees Improving Economy, Minutes Show

Washington, DC, Sept. 2, 2009--Federal Reserve officials were more confident than ever that the steep downturn in the economy was coming to an end, according to the minutes of their last policy meeting released Wednesday.

However, there was some suspicion that the recovery would be pretty fragile and vulnerable to shocks.

A key unknown is whether consumer spending would be restrained and if households will maintain the new-found religion to save more of their income.

The current thinking, according to the summary, is that the recovery would be shaky at first -- likely be led by businesses rebuilding inventories. Only in 2010 would a firmer recovery take hold.

"Fed officials expected the pace of recovery to pick up in 2010, but they expressed a range of views, and considerable uncertainty, about the likely strength of the upturn," the summary said.

As a result, Fed officials decided to stand pat and make no changes to their zero-interest-rate policy and extraordinary quantitative easing plans.

Taken all together, the minutes suggest a fairly quiet meeting.

There were no major changes to the economic outlook that had to be prepared for Congress late June. Fed officials expect the recovery to take hold sometime in the last six months of this year.

There was still a lively debate among officials over inflation. The majority of Fed officials are not worried about the possibility of a spike in higher prices.

Fed officials also see "no more that moderate growth" in consumer spending going forward.