WASHINGTON (Reuters) - Federal Reserve officials felt they could decide to start scaling back the U.S. central bank's massive asset purchase program at one of its next few meetings, provided this was warranted by economic growth.
Minutes of the Fed's October 29-30 policy meeting, released on Wednesday, also showed most participants thought reducing interest paid to banks on the excess reserves held at the Fed was worth considering at some stage, in order to boost lending.
Officials also held an unscheduled video conference call on October 16 to discuss contingency plans should the U.S. Treasury become temporarily unable to meet debt obligations due to a bitter budget battle in Washington over raising the U.S. debt ceiling.
"Many members stressed the data-dependent nature of the current asset purchase program," according to the minutes. "Some pointed out that, if economic conditions warranted, the Committee could decide to slow the pace of purchases at one of its next few meetings."
U.S. stocks and crude oil prices turned lower on the news of the minutes, while yields on U.S. Treasury bonds went up.
Economists said the tone of the debate among officials last month highlighted their desire to shift the focus of their policy action from bond buying toward forward guidance, aimed at holding down rate hike expectations.
"Seriously, at some point they will taper. They are looking at strengthening their forward guidance," said Stephen Stanley, chief economist, Pierpont Securities, Stamford, Connecticut.
Officials voted to keep buying bonds at a $85 billion monthly pace at the October meeting and many economists think they will delay scaling back purchases until January or March.
The Fed has held interest rates near zero since late 2008 and quadrupled its balance sheet to $3.9 trillion through three massive rounds of bond buying.
That said, St. Louis Fed chief James Bullard said earlier on Wednesday that he would not rule out action at their meeting in December, noting cumulative gains in the labor market since last year.
His comment echoed a remark by Fed Chairman Ben Bernanke on Tuesday, who also said the central bank could interest rates near zero until "well after" unemployment falls under 6.5 percent.
The Fed has promised to hold rates near zero until unemployment hits 6.5 percent, provided the outlook for inflation stays under 2.5 percent. But Bernanke said the Fed could be patient in waiting to start raising rates. The U.S. jobless rate was 7.3 percent in October.