Fed Decided on Steady Course at Fall Meeting : Money: Minutes of the Nov. 14 meeting show that the Federal Reserve left open the possibility of lower interest rates if the economy worsened.

Federal Reserve policy-makers decided not to change monetary policy at their late fall meeting but left open the possibility of lower interest rates if economic events dictated, according to minutes released Friday.

“While current indicators of economic activity suggested a somewhat weaker expansion, most of the members agreed that a steady policy course was desirable at this point, especially in light of the stimulus provided by recent easing actions,” said the minutes of the Nov. 14 meeting of the Federal Open Market Committee.

Most of the policy-makers agreed, however, that “some further easing might be needed if the incoming information on business activity suggested more softening than most members currently expected.”

The Fed permitted short-term interest rates to drop a quarter of a percentage point last week to 8.25%. It was the first decrease since Nov. 7, when the central bank also permitted the federal funds rate to decline a quarter of a percentage point.

Manipulation of this rate, the interest rate that banks charge each other for overnight loans, is the primary lever the Fed uses to control short-term interest rates. It has used this lever several times since last June, when it began relaxing its grip on credit to slow inflation.

The initial decision to keep policy unchanged was reached on a 10-1 vote of the open market committee, composed of Fed governors in Washington and five of the 12 Fed regional bank presidents.

Fed governor Martha Seeger cast the dissenting vote, contending a further easing was needed in view of persisting weakness in the manufacturing sector, particularly automobiles, and a likely softening in construction and capital expenditures.

The committee met again last week, but minutes of that meeting will not be released until next month. The committee gathers in secret eight times a year to formulate monetary policy and confers by telephone as needed.

In its review of economic conditions last month, it found that the economy continued to expand, “though unevenly and at a somewhat slower pace than earlier in the year.”

“While the service-producing sector appeared to be growing moderately, manufacturing had been weak, owing to sluggish demand and to strikes and other disruptions to production,” the minutes said. “Price increases had been smaller since midyear, but there had been no abatement of wage inflation.”

Non-farm employment grew appreciably in October, it said, but slower than in previous months.

“Widespread job gains were apparent in the service-producing sector, but manufacturing payrolls declined further as a result of continued weakness in motor vehicles and other durable goods industries,” the report said.

The minutes also showed that the Fed staff expected the economy was likely to grow at a slower pace.