Many Federal Reserve policy makers said additional stimulus would probably be needed soon unless the economy shows signs of a durable pickup, according to minutes of their most recent meeting.

"Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery," according to the record of the Federal Open Market Committee's July 31- Aug. 1 gathering released today in Washington.

Policy makers said after the meeting that they will step up record stimulus if needed to spur growth and cut a jobless rate stuck above 8 percent since February 2009. Chairman Ben S. Bernanke will have an opportunity to clarify his views in an Aug. 31 speech at a forum for central bankers in Jackson Hole, Wyoming, where he signaled a second round of bond buying by the Fed in 2010. Fed officials next meet on Sept. 12-13.

Many participants at the Fed's meeting said that a new large-scale asset-purchase program "could provide additional support for the economic recovery."

The minutes also reflected discussion of the merits of purchasing Treasury securities relative to mortgage-backed securities. While "some" members worried about the impact on debt markets, a staff analysis showed "substantial capacity for additional purchases without disrupting market functioning."

David Fuller's view This is cheerleading by the Fed and as such is likely to be its best policy at this time. The Fed does not want to announce a new version of QE, which would inevitably be controversial, not least during the countdown to a presidential election. The Fed does not want to be seen as favouring either political party. Also, more QE would be an admission that the earlier measures did not work as well as hoped.

If cheerleading can support the stock market, the Fed will hope that this encourages bank lending and bolsters both consumer and business spending. It could but there are plenty of other factors on people's minds.

Consumers are still deleveraging and fewer of them trust the stock market than in earlier decades. Job insecurity and the cost of living, which is much higher than CPI as everyone knows, leave consumers in a cautious mood.

Business leaders are concerned about the slowdown in global GDP, in addition to their domestic economy which is certainly not firing on all cylinders. In the US, uncertainty about post election policies, not least taxation, is sufficient reason for continued caution.

Meanwhile, rising commodity prices, led by grains (corn & soybeans) and crude oil (Brent & WTI) are on a potential collision course with a stock market rally which is now short-term overbought and near prior resistance from the year's earlier highs.

I would not be surprised to see a reaction or two during September and the first half of October, followed by some additional gains through yearend.