Further monetary easing remains an option: Federal Reserve

WASHINGTON: The Federal Reserve signalled further monetary easing remains an option to protect the US economy from the danger that lawmakers will fail to reach an agreement on the budget or Europe's debt woes worsen.

Several members of the Federal Open Market Committee said new actions could be necessary if the economy loses momentum or "downside risks to the forecast became great enough," according to minutes of the Federal Open Market Committee's April meeting released on Wednesday in Washington.

US stocks declined on Wednesday as reports the European Central Bank will stop lending to some Greek banks overshadowed stronger-than-forecast data on US housing and manufacturing.

A focus on threats to the US economy gives officials more scope to ease policy, said Michael Hanson, senior US economist at Bank of America in New York.

"If you have very clear and potentially large downside risks, like the fiscal cliff and Europe's debt crisis, you are going to have a little more of an easing bias in place," said Hanson, who formerly worked in the Fed's monetary affairs division. The Standard & Poor's 500 Index ( SPX) fell 0.4% to 1,324.80, the lowest since February.

Treasury notes erased losses, leaving the yield on the 10-year Treasury note little changed at 1.76%. A fiscal tightening caused by a failure of US lawmakers to agree on a budget could damage the economy even before cuts take effect as an unclear outcome prompts businesses to defer investment and hiring decisions, the minutes said.