**MNI POLICY: FOMC Minutes: Most Officials See Rates On Hold>

--Downside Risks Remain 'Elevated' But Economy So Far Resilient 

--Many See Standing Repo Facility As Useful, But Details Require Study

--Crisis Fighting Tools Discussed; Forward Guidance, QE 'Effective'

By Jean Yung

     WASHINGTON (MNI) - Most Federal Reserve officials in October 

anticipated keeping rates steady in a 1.50% to 1.75% range unless new 

data prompt a material reassessment of the economic outlook, though they 

continued to view downside risks as elevated, according to the minutes 

of the latest FOMC meeting released Wednesday. 

     Weakness in global growth, uncertainty on trade developments and a 

persistent shortfall in inflation from the Fed's 2% symmetric target 

motivated the FOMC's third rate cut of the year at the October 29-30 

meeting, the minutes said. 

     "Most participants judged that the stance of policy, after a 25 

basis point reduction at this meeting, would be well calibrated to 

support the outlook of moderate growth, a strong labor market, and 

inflation near the Committee's symmetric 2 percent objective and likely 

would remain so as long as incoming information about the economy did 

not result in a material reassessment of the economic outlook," the 

minutes said. 

     A couple policymakers even suggested that the FOMC "reinforce" its 

policy statement with an indication that another cut was "unlikely in 

the near term" unless data suggest a "significant slowdown in the pace 

of economic activity," the minutes said. That sentiment did not appear 

to have made it into the October policy statement, which simply saw an 

excisement of the pledge to "act as appropriate" to support the economy. 

     The following are other key points from the minutes of the 

October FOMC meeting: 

     --A couple officials who supported the rate cut said it was a 

"close call" while some, including the two dissenting Fed presidents, 

favored no cut. They wanted more time to assess the effects of the cuts 

so far and noted there was little indication that weakness in business 

sentiment was spilling over into labor markets and consumer spending. 

Excess risk-taking as a result of lower rates was another concern. 

     --Officials generally regard the economy outlook as positive, but 

inflation pressures are still muted and the risk that a global slowdown 

would weigh further on domestic growth was "prominent."

     --FOMC weighed options of creating a standing repo facility versus 

conducting modest and frequent repo operations. Many officials indicated 

that they would find a standing repo facility "useful" to support the 

fed funds rate in the event of a shock to the system and several 

officials noted it may encourage banks to hold less reserves in normal 

times. However, the details of pricing, counterparties and acceptable 

collateral need to be worked out. 

     --Framework review discussions continued with a study of forward 

guidance and balance sheet policies and a combination of the two. Fed 

staff economists found these tools to have been effective after the 

crisis. However, with longer term rates declining to very low levels, 

"there might  be limited scope for balance sheet tools to provide 

accommodation." All officials rejected negative interest rates as an 

attractive policy tool for the United States. 

--MNI Washington Bureau, Tel: +1 202-371-2121; email: dcoffice@marketnews.com

     ** MNI Washington Bureau: 202-371-2121 ** 

[TOPICS: MT$$$$,MMUFE$,MGU$$$,M$U$$$,MAUDR$]