FED SAYS RECOVERY IS NOT STRONG ENOUGH TO EASE BOND BUYS

Washington, January 5- Federal Reserve policymakers said at their December meeting that improvements in the economy did not meet the threshold for scaling back their controversial plans to purchase $600 billion in bonds.

"While the economic outlook was seen as improving, members [of the Federal Open Market Committee] generally felt that the change in the outlook was not sufficient to warrant any adjustments to the asset-purchase program, and some noted that more time was needed to accumulate information on the economy before considering any adjustment," the Fed said in minutes of its Dec. 14 policy meeting, which were released Tuesday.

The program, to run through June, is intended to lower interest rates, spur consumer and business spending, and lift stock prices.

The policy-setting committee "emphasized that the pace and overall size of the purchase program would be contingent on economic and financial developments," according to the minutes. "However, some indicated that they had a fairly high threshold for making changes to the program," the minutes added.

The second round of purchases, known as quantitative easing and dubbed QE2 by investors and economists, has been criticized by Republican politicians as well as officials in China, Germany, and Brazil, who say it may weaken the dollar and risks igniting inflation.

The minutes of the meeting show that with economic growth picking up since the purchasing program began, Fed officials remain focused on an unemployment rate now at 9.8 percent and forecast to stay high for some time and an inflation rate that is lower than the Fed prefers.

During the December meeting, Fed officials affirmed their pledge to purchase $600 billion in Treasury securities through June. The purchases were announced at the Fed's Nov. 3 meeting.

Fed Chairman Ben S. Bernanke began the second round of asset purchases after the Fed bought $1.7 trillion in mortgage debt and Treasuries through March 2010. That stimulus helped pull the nation out of the worst recession in seven decades without reducing an unemployment rate close to a 26-year high.

<