Fed Minutes Show Nudge Toward QE3

NEW YORK (TheStreet) -- Members of the Federal Reserve reiterated that the economy was still showing signs of modest growth at the central bank's most recent policy meeting but few were in support additional quantitative easing at the time.

The Fed voted in favor of a continuation of its Operation Twist bond maturity extension program at the June 19-20 meeting, whose minutes were released Wednesday afternoon. Stocks sank to their lows of the day after the transcript was released despite the indications that the Fed was shifting further in the direction of more asset purchases.

"A few members expressed the view that further policy stimulus likely would be necessary to promote satisfactory growth in employment and to ensure that the inflation rate would be at the Committee's goal," the minutes read. "Several others noted that additional policy action could be warranted if the economic recovery were to lose momentum, if the downside risks to the forecast became sufficiently pronounced, or if inflation seemed likely to run persistently below the Committee's longer-run objective."

The minutes continued: "The Committee agreed that it was prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability."

"There was a decided shift in the direction of more easing, the nuances of the minutes clearly suggest that we were closer to easing at the last meeting than the prior meeting," said Dan Greenhaus, chief global strategist at BTIG.

Greenhaus was referring to the committee policy action of the minutes, which said a few members expressed the view that more policy stimulus would be necessary to promote growth in employment, and that several other members believed additional policy action would be warranted if U.S. economic conditions worsened.

Multiple months of poor jobs growth, the surprising contraction in the most recent ISM manufacturing survey and 1.9% GDP growth have spurred greater murmurs of Fed easing in order to stem a further slide into possible recession.

A possible third round of quantitative easing, or QE3 as it's known, would likely provide a brief reprieve for equities and give gold a nice jump from its current trading range, analysts say.