The Federal Reserve Board continues to take a very cautious approach to managing the nation's economy, signaling in its Dec. 11 minutes the need for further rate cuts and even rate increases based on market conditions.

According to the minutes released today by the Federal Open Market Committee (FOMC), the members are concerned that the credit crunch will restrain economic growth further, leading to additional credit tightening.

"Such an adverse development could require a substantial easing of policy," wrote the FOMC.

On the other hand, the FOMC indicated its right to reverse course.

"Members also recognized that financial market conditions might improve more rapidly than members expected, in which case a reversal of some of the rate cuts might become appropriate," the committee said.

While the Fed is mostly praised for its caution, Lawrence Yun, chief economist of the National Association of Realtors, said one negative result of the Fed's measured approach is that it sends a message to home buyers that rates will continue to drop.

"If buyers perceive that there will be further rate cuts, they will continue to wait," said Yun, who added that rate cuts are anticipated for late January and March.

"I'd like to see them cut rates by 75 basis points and have the cuts be over and done with," said Yun, who made clear in his comments to Builder Online that such a bold move is highly unlikely.

The FOMC meets next from Jan. 29-30.