Details of the US Federal Reserve's last meeting reveal divisions over how soon to reverse course on monetary policy, although the Fed appeared intent on completing a $600 billion bond-buying plan.
A few officials at the Fed's March 15 policy-setting meeting thought a stronger economy could warrant tightening monetary conditions this year, although others believed the Fed could maintain its ultra-loose stance beyond 2011, according to minutes of the meeting released on Tuesday said.
Similarly, some members of the Fed's policy panel thought the central bank should be prepared to cut short its bond purchases if growth quickened or inflation threatened to move higher. But several others did not anticipate any need for adjustments, the minutes said.
The split reflects the challenge the Fed faces in timing the withdrawal of its massive support for the US economy. The central bank cut overnight interest rates to near zero in December 2008 and then bought $1.7 trillion in mortgage-related and government debt. It launched its latest bond-buying plan in November.
Tightening US financial conditions too early could stifle a tentative economic recovery, while waiting too long could unleash a surge of inflation.
In a policy statement at the conclusion of its meeting on March 15, the Fed said the economy was on a firmer footing but that high unemployment and still-low inflation warranted continuing its support for the recovery.
Despite impatience among its ranks, top officials at the Fed have given no sign they intend to curb bond buying or move with any haste to tighter financial conditions.
In that regard, the Fed stands in contrast to other major central banks around the world, which are ready to raise borrowing costs to counter rising prices. The European Central Bank is expected to bump rates higher on Thursday.
The Fed meeting minutes showed officials increasingly concerned about a surge in energy and commodity prices and the possibility an inflationary psychology might take root.
They concluded that the current bout of higher inflation would be temporary, but vowed to keep a watchful eye on whether consumers and businesses were beginning to expect higher inflation in the future. Such expectations could become self-fulfilling if built into wage and price decisions.
