Many Federal Reserve officials said more progress in the labormarket is needed before deciding to slow the pace of assetpurchases, according to minutes of their last meeting. “Mostobserved that the outlook for the labor market had shown progress”since the-bond buying program began in September, according to therecord of the April 30-May 1 gathering released today inWashington. “But many of these participants indicated thatcontinued progress, more confidence in the outlook, or diminisheddownside risks would be required before slowing the pace ofpurchases would become appropriate.”

Policy makers said May 1 that they may accelerate or slowmonthly purchases of $40 billion in mortgage securities and $45billion of Treasuries in response to changes in the labor marketand inflation. They also pledged to hold the target interest ratenear zero as long as unemployment remains above 6.5 percent and theoutlook for inflation doesn't exceed 2.5 percent.

A number of officials said they were willing to taper bondbuying as early as the next meeting on June 17-18 if economicreports show “evidence of sufficiently strong and sustainedgrowth,” according to the minutes.

The record gives more detail on a debate within the Fed over howand when to curtail asset purchases that have enlarged its balancesheet to a record $3.35 trillion. The committee led by Chairman BenS. Bernanke is pressing on with purchases until the outlook for thelabor market has “improved substantially.”

The minutes also showed that Fed officials began a review oftheir exit strategy, which was adopted in June 2011 as they soughtto assure investors the central bank had the means to avoidigniting inflation once job growth, wages, and demand startedmoving up.

While “the broad principles adopted almost two years agoappeared generally still valid,” the minutes showed, the largerbalance sheet “suggested a need for greater flexibility.”

Officials disagreed over whether the principles should beformally revised or if they should wait in order to learn moreabout how the exit might unfold. Bernanke instructed the Fed'sstaff to study the issue, the minutes said.

Bernanke earlier today said in testimony to the Joint EconomicCommittee of Congress that the world's largest economy remainshampered by high unemployment and government spending cuts, andraising interest rates or reducing asset purchases too soon wouldendanger the recovery.

Home Prices

While the economy is expanding, as home price gains and recordstock prices help offset federal budget cuts, employment growthstill hasn't been sufficient for Fed officials to alter theirunprecedented monetary easing.

“It's a moderate recovery, and we're overcoming a record fiscaldrag,” Joseph Carson, director of global economic research at NewYork-based AllianceBernstein LP, which has $453 billion in assets,said before the minutes were released. “We've actually had fairlygood growth even during the fear about the fiscal cliff” and theU.S. has experienced “very consistent growth in the labormarket.”

Payrolls expanded by 165,000 workers last month, while revisionsadded a total of 114,000 jobs to the employment count in Februaryand March, Labor Department data show.

Federal Reserve Bank of New York President William C. Dudleysaid yesterday he hasn't decided whether the central bank's nextmove should be to increase or decrease bond-buying. “Because theoutlook is uncertain, I cannot be sure which way, up or down, thenext change will be,” Dudley said in a speech in New York.

St. Louis Fed President James Bullard, who votes on policy thisyear, said yesterday the central bank should continue the purchasesbecause they're the best available option for policy makers toboost growth that is slower than expected.

Dudley's and Bullard's comments helped lift U.S. stocks to arecord. The Standard & Poor's 500 Index advanced 0.2 percent toclose yesterday at an all-time high of 1,669.16, extending thisyear's gain to 17 percent.

Some Fed officials in recent weeks have signaled they favortapering the quantitative-easing program in the next few months.San Francisco Fed President John Williams said last week that theFed may want to reduce the pace of its purchases as early as thissummer “if all goes as hoped.”

Chicago's Charles Evans said May 20 that he'd like to seemonthly employment growth of 200,000 or more for at least sixmonths before judging the labor market substantially improved.Employers have added an average of 173,000 workers a month over thepast year.

'Getting Better'

Kansas City Fed President Esther George said May 10 the“employment picture is getting better,” with monthly payroll growthaveraging about 200,000 “a positive sign.” George, who hasdissented this year against FOMC decisions, also said the centralbank's unprecedented stimulus threatens to eventually push uplong-term inflation expectations.

While the jobless rate has moved toward the Fed's goal of 5.2percent to 6 percent, inflation has fallen further from thelong-run target of 2 percent, dropping in March to 1 percent from ayear earlier, the slowest since 2009, according to the Fed'spreferred inflation gauge.

The world's largest economy expanded at a 2.5 percent annualizedrate in the first quarter, the Commerce Department said last month.The gain followed a 0.4 percent fourth-quarter advance, the slowestsince the first quarter of 2011. The economy will grow 2 percentthis year, according to the average of 81 estimates in a May 3-8Bloomberg survey of economists.

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