Federal Reserve Board policy makers decided at a meeting in mid-December to ease monetary policy slightly by making more cash available to the nation's banking system, according to a policy record of the meeting released yesterday.

The action has contributed to a small decline in the key interest rate on so-called federal funds, which are bank reserves loaned by one financial institution to another.

The federal funds rate had been about 8 percent in December, and it averaged 7.85 percent in the week ended Wednesday. This rate, which is heavily influenced by Fed actions, usually is the key to the level of other short-term interest rates.

At the time of the December meeting, most of the available evidence "suggested that economic activity was expanding at a relatively modest pace," the policy record said. The policy makers, members of the Federal Open Market Committee, were divided over how strong they thought the economy would be in 1986.

According to the statement, the members of the FOMC also differed on whether to ease policy at all. Some favored no change. "A majority, however, indicated a preference for moving toward implementing some slight easing of reserve conditions. Several also commented that decisions about the precise degree of reserve pressure should depend in part on whether the discount rate was reduced, and if so by how much," the policy record said.

There has been no change in the 7.5 percent discount rate, the interest rate the Fed charges when financial institutions borrow reserves -- cash -- directly from it rather than from other institutions. The discount rate is set by the Fed, which has seven members, rather than the larger FOMC, which also has five voting members from among the presidents of the 12 regional Federal Reserve banks.

The policy record made it plain that any easing was to be modest.

Since the December meeting, there have been a number of indications that economic activity is picking up, including reports of strong gains in employment in December and January.

However, figures released by the Fed this week suggest that the central bank has continued to make reserves more readily available to financial institutions.

The FOMC met again this week to set policy for coming months and establish formal targets for monetary growth for1986.

Fed Chairman Paul A. Volcker is expected to disclose the new targets at a House Banking Committee hearing on Wednesday.