Federal Reserve officials last month debated increasing and extending asset purchases should the economy weaken, with a few favoring the move and one seeking a reduction, minutes of their last meeting showed.

Fed Chairman Ben S. Bernanke and his colleagues are trying to withdraw unprecedented stimulus and emergency lending programs without impeding efforts to sustain a recovery and reduce unemployment, which is now close to a 26-year high.

"To keep inflation expectations anchored, all participants agreed that monetary policy would need to be responsive to any significant improvement or worsening in the economic outlook and that the Federal Reserve would need to continue to clearly communicate its ability and intent to begin withdrawing monetary policy accommodation at the appropriate time and place," the Fed's Open Market Committee said in the minutes of its Dec. 15-16 meeting in Washington, which were released Wednesday.

The Fed is buying $1.25 trillion of mortgage-backed securities issued by housing-finance companies Fannie Mae, Freddie Mac and the Government National Mortgage Association. The central bank began the program in January 2009.

The Fed separately purchased $300 billion of Treasury securities from March through September 2009 and is buying, through March, $175 billion of corporate debt issued by the government-backed Fannie Mae and Freddie Mac and the government-chartered Federal Home Loan banks.

Some officials said there was a risk that the end of Fed purchases and federal homebuyer tax credits may "undercut" improvements in the housing market, the minutes said.

"The Fed is keeping some levers out there as options," said Paul Ballew, a former Fed economist who's now a senior vice president at Nationwide Mutual Insurance Co. in Columbus, Ohio. "They're focused on a balancing act: wrestling with a recovery that's gaining solid footing but that remains fragile."

Under Bernanke, the Fed has cut interest rates almost to zero and pumped more than $1 trillion into the financial system to battle the worst recession since World War II.

The minutes said that the Federal Reserve Bank of New York's open market desk "was continuing to develop" the capacity to conduct reverse repurchase agreements using agency mortgage-backed securities collateral, and expected the work would be finished in the first half of this year.

The New York Fed is also "exploring the operational issues associated with expanding potential counterparties" for reverse repurchase agreements beyond the 18 primary dealers, the minutes said.

In a reverse repo, the Fed lends securities for a set period, draining cash from the banking system. At maturity, the securities are returned to the Fed, and the cash to the 18 primary dealers that act as counterparties.

"The reverse repo transactions authorized in this resolution shall have terms to maturity of 20 business days or less and the total amount of all transactions outstanding at a given time shall be $5 billion or less," the minutes said.

Meeting participants also approved a suggestion by open market desk officials to not reinvest the proceeds from maturing agency debt or prepayments on mortgage debt as an interim approach pending further discussion.

The FOMC next meets Jan. 26-27.

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