The minutes from the Federal Reserve's closed-door meetings can offer important clues about where the economy stands — and what the Fed might want to do to make it better.
What did the central bank say in the latest such meeting?
Here are some key excerpts from the minutes that were released Wednesday from the March 17-18 meeting, along with an explanation of what each one means.
WHAT THEY SAID: "Members agreed that substantial additional purchases of longer-term assets eligible for open market operations would be appropriate. Such purchases would provide further monetary stimulus to help address the very weak economic outlook and reduce the risk that inflation could persist for a time below rates that best foster longer-term economic growth and price stability."
WHAT THEY MEANT: With the Fed's key bank lending rate already at a record low near zero, Fed chairman Ben Bernanke and his colleagues decided on March 18 that bolder action was needed to revive the economy.
The Fed decided to start buying $300 billion in government debt, purchase $750 billion more in mortgage-backed securities from Fannie Mae and Freddie Mac and buy an extra $100 billion in the mortgage giants' debt.
The goal: drive down interest rates on mortgages and a variety of consumer loans to spur Americans to crank up spending. Such a move would help lift the country out of recession.
The Fed's $1.2 trillion buying binge also was aimed at reducing any risk of deflation, a widespread and prolonged decline in prices that can drag the economy down even further — and that can be difficult to reverse. The last time the country suffered a serious case of deflation: the 1930s. (For more on the dangers of deflation, read on.)
WHAT THEY SAID: "Overall, most participants viewed downside risks as predominating in the near term, mainly owing to potential adverse feedback effects."
WHAT THEY MEANT: This is about the vicious cycle that Bernanke and his Fed colleagues have been desperately trying to break since the financial crisis erupted nearly two years ago.
Rising unemployment and production cuts lead consumers to rein in spending. In turn, that hurts companies' performance, which forces them to lay off more workers or cut back their hours or pay to hold down costs. All this weakens the economy further, aggravating financial problems at banks and elsewhere and making it more difficult for people and companies to borrow money.
All the negative forces feed on each other, creating what some officials refer to as the "adverse feedback loop."
Given that danger, Fed officials feared that the recession, which started in December 2007 and has snatched 5.1 million jobs, could turn even worse.
WHAT THEY SAID: "Several participants said that the degree and pervasiveness of the decline in foreign economic activity was one of the most notable developments since the January meeting."
WHAT THEY MEANT: Economic troubles overseas are sapping foreign buyers' demand for U.S.-produced goods and services — aka U.S. exports. And that's adding to the United States' own economic problems.
U.S. exports were a main force keeping the economy afloat last spring. In the fall, the economy shrank at a 0.5 percent pace, but it would have been worse had it not been for modest export growth. No such luck in the final three months of last year, when the economy staggered backward at a 6.3 percent pace, partly because of an alarming, 23.6 percent annualized drop in exports — the biggest decline in 37 years.
Many analysts predict the economy will keep shrinking through the first six months of this year. The Fed basically said don't count on exports being a source of support for the U.S. economy anytime soon.
WHAT THEY SAID: "Participants saw little chance of a pickup in inflation over the near term, as rising unemployment and falling capacity utilization were holding down wages and prices and inflation expectations appeared subdued. Several expressed concern that inflation was likely to persist below desired levels, with a few pointing to the risk of deflation."
WHAT THEY MEANT: Rising prices aren't a threat these days. Falling prices are what Fed officials are worried about. Rising unemployment, production cutbacks (aka "falling capacity utilization"), wage freezes and cuts, and reductions to workers' hours are all forces that diminish the danger of inflation but can increase the threat of deflation.
Falling prices sound like a gift at first — at least to consumers. But a widespread and prolonged decline can wreak more havoc on the economy, dragging down Americans' wages, and clobbering already-stricken home and stock prices. Dropping prices already are hurting businesses' profits, forcing them to slice capital investment and lay off workers. Deflation also makes it harder for people to pay off debt.