The economy is improving, but not enough to cut back on the government bond-buying program just yet, according to the minutes from the Fed's latest meeting.When the Fed met last month, it -- like many economists and business executives -- saw signs of improvement in the U.S. economy. But according to the minutes from the Fed's meeting, released Tuesday, the improvement wasn't enough to justify tapering its quantitative-easing bond-buying program, also known as QE2.

The plan, announced in November, calls for the government to purchase $75 billion worth of bonds per month -- and up to $600 billion in assets through June -- to help stimulate the economy. The December minutes indicate that some members of the Fed's board have "a fairly high threshold" for making changes to the central bank's controversial quantitative-easing program.

At that meeting, the Fed also reiterated its near-zero interest rate policy, underscoring that it plans to keep rates "exceptionally low" for an "extended period." The low-interest rate policy already has been in effect for about two years.

The release of the December minutes had only a slight impact on U.S. markets. The Dow Jones Industrial Average, down about 5 points before the minutes' release, was up 15 points to 11,686 about a half-hour later. In the bond market, bond prices were virtually unchanged, with the interest rate on 10-year U.S. Treasury Note rising only 0.01 of a percentage point to 3.33%.

A Stronger U.S. Economy

Concerning economic conditions, the Fed concluded that "economic activity was increasing at a moderate rate, but that the unemployment rate remained elevated," with a low labor-force-participation rate and employment-population ratio. On the upside, the Fed said that the demand for labor had grown in recent months, with the services sector continuing to make up the bulk of the private-sector job gains.

The Fed also noted that consumer spending had picked up in October and November, with exports rising, and that the recovery in business spending and equipment (including software) purchases appeared to be continuing. Industrial production also increased at a solid pace in October, making widespread advances, according to the minutes.

Still, inflation remains low, the Fed concluded. In October, the personal consumption expenditures index (PCE), which measures consumer inflation, reached its lowest level in the past year. Prices for so-called "core" goods and services, which exclude food and energy, also fell in that time. Unsurprisingly, "labor cost pressures were still restrained," the Fed added.

Meanwhile, the housing market remains weak. "Activity in the housing sector was still quite depressed," the Fed said. The sector continues to be hurt by "the persistence of a large excess supply of existing homes on the market and tight credit conditions for construction," which have apparently constrained the building of new homes.

A Small Victory

Overall, the minutes reinforced recent economic data showing a strengthening U.S. economic expansion, modest labor market improvement and little progress on the housing front. The conclusions are hardly cause for investors to celebrate. But after the talk of potential deflation and a double-dip recession that permeated financial circles in late 2010, they do represent a small step forward.

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January 05 2011 at 7:54 AM Report abuse rate up rate down Reply
sfamilyent

What did QE2 have to do with the small improvement in the economic climate? Frankly I'm more concerned that the Fed will act in a manner that feeds another asset bubble that will do more harm in the long term than good.

January 05 2011 at 6:58 AM Report abuse +1 rate up rate down Reply
1 reply to sfamilyent's comment
ajallenky

We are buying bonds from OURSELVES - because China and India are NOT buying them anymore - this is the same thing as PRINTING more $ without anything to justify the extra dollars - called inflationary spending - this was suppose to keep interest rates down but has failed miserably - look at the 75 pt. rise in interest rates in the last two months since QE2 has been in effect - these morons have the upper hand in this game since they write the rules and are independent from ANY Gov't agency - ABOLISH THE FED. The Carter Administration's double diget inflationary sprial will look tame compared to what you will see in 2011 and 2012 - look at the prices of gas, food, and metals - where are they headed !!!!

January 05 2011 at 6:57 AM Report abuse +2 rate up rate down Reply
2 replies to ajallenky's comment
wfreeberg

Just a factual update; the average Mexican worker gets about 1/4th the American worker per hour. Their household income is about 1/4th of ours.

January 05 2011 at 5:53 AM Report abuse -2 rate up rate down Reply
Robert & Lisa

Isn't it strange how the Fed is doing everything it can to keep this group of Demoncrat thugs in office. People, evil, ultra rich men like George Soros aren't backing these corrupt Demoncrat politicians for your benefit. They are out to destroy our country's middle class. They want all of the power and money and if we don't vote these corrupt thugs out in 2012, they'll get it. It'll be like Mexico where the average Mexican makes less than 6 dollars a day and drug lords and the evil, ultra rich do whatever they please, paying off or killing the corrupt politicians whenever they get in the way.

January 05 2011 at 5:23 AM Report abuse +3 rate up rate down Reply
2 replies to Robert & Lisa's comment
wfreeberg

Just a factual update; the average Mexican worker gets about 1/4th the American worker per hour. Their household income is about 1/4th of ours.

January 05 2011 at 5:53 AM Report abuse -2 rate up rate down Reply
danland35

Fred,

is this what hapens to a good conservative once they retire?
The apple turns out to be quite bitter once you bite into it
after trying your hardest not to climb the tree all your life.

Nice try Fred, but your true nature is showing. people are just too
stupid to know what they have already given up. It's never coming
back folks. Just like the whos in whoville.

Are there any Hortons left in this F'd up country?

January 04 2011 at 11:59 PM Report abuse +1 rate up rate down Reply
danland35

Samir,

how do you know the forclosures end in 4 months? Crystal ball?

January 04 2011 at 11:22 PM Report abuse +1 rate up rate down Reply
danland35

Fred, be a good citizen and die shortly after you retire, leaving the value consumed by ther rest of your life to us mis-managers of money. After all, there is no real value to anything, it's all percieved value that changes moment-by-moment, Right?

January 04 2011 at 11:19 PM Report abuse rate up rate down Reply
2 replies to danland35's comment
fred

Ain't it funny how people spend money they don't really have to buy things they don't really need to impress people they don't really like? For the last 30 years or so all these "free" social programs now seem to cost money....and who has to pay? Well as long as it's not my ox being gord, let's pass more "free" stuff!!

January 04 2011 at 11:26 PM Report abuse +1 rate up rate down Reply
Samir semaan

The change in congress and the new mood didn't change the landscape regarding the economy even consumers come out in large droves buying and even more cars were sold but the housing still lacking behind because the forclosures drive the prices down and this is the reality and this will be for another 4 months till the mood change and the ending of forclosures.

January 04 2011 at 11:10 PM Report abuse rate up rate down Reply
1 reply to Samir semaan's comment
fred

Four months???? Better figure longer than four months........

January 04 2011 at 11:14 PM Report abuse +1 rate up rate down Reply
fred

Bring on deflation!!!! I'm retired, on a fixed income and I would LOVE the cost of everything to go down!!

January 04 2011 at 11:06 PM Report abuse +2 rate up rate down Reply
1 reply to fred's comment
Robert & Lisa

It ain't going to happen fred as long as you keep voting these rich man puppets (socialist demoncrats) into office.

January 05 2011 at 5:26 AM Report abuse +1 rate up rate down Reply
danland35

OK, no-one is home?

How about Lou Dobbs predicting this since the 80s as he beat his head against the brick wall of the US financial/Corporate mentality of outsourcing? Got anything to say about that?

Why dosen't anyone in this country listen to someone who talks about consequences further than a quarter out? Are we all ADHD?

January 04 2011 at 10:50 PM Report abuse +1 rate up rate down Reply
1 reply to danland35's comment
marks970

its not even half over

January 05 2011 at 8:22 AM Report abuse rate up rate down Reply