Fed mulling sterilized bond purchases: report WASHINGTON (Reuters) - Federal Reserve officials are considering a novel approach to bond buying aimed at countering some of the worry that another round of asset purchases could fuel inflation, according to the Wall Street Journal. Citing people familiar with the matter, the newspaper reported on Wednesday that should the Fed decide to buy more bonds to boost growth, it could borrow back the money it used to buy those bonds for short periods of time at low interest rates. Doing so would take that money out of circulation, or sterilize it. Representatives from the Federal Reserve and the New York Federal Reserve Bank, which conducts the central bank's bond trading, declined to comment on the report. The Fed is not expected to launch another round of bond buying at a meeting next week. It cut benchmark interest rates to near zero in December 2008 and has bought $2.3 trillion in bonds to push down short- and long-term interest rates low to stimulate growth. However, Chairman Ben Bernanke has signaled that he would consider another round of bond buying to support the fragile recovery if tepid growth and modest labor market gains falter. Many analysts believe the Fed will resort to renewed quantitative easing later this year as higher oil prices and Europe's economic problems weigh on the United States. Fed officials are considering different options should they decide to embark on another round of asset purchases, the report said. Among these is a novel approach in which they would buy bonds, but restrict how investors and banks could use that money. The Fed has tested tools to take money out of the financial system such as reverse repurchase agreements to prepare for the day when the central bank wants to begin to tighten financial conditions. Reporting By Mark Felsenthal; Editing by Neil Stempleman