Federal Reserve officials spent much of their meeting last month debating when to start raising short-term interest rates, with many worrying that acting too soon could dampen the economic recovery, according to minutes of the meeting released Wednesday.
Some members of the policymaking Federal Open Market Committee were concerned that changing their so-called forward guidance on a rate increase could cause financial markets to overreact and lead to a tightening of credit, the minutes said.
The statement released after the Jan. 27-28 meeting reiterated wording first used the previous month: that the Fed would be “patient” in deciding when to enact the first interest-rate increase since 2006.
The central bank started reducing its benchmark short-term rate to fight the oncoming Great Recession. The rate has been near zero since December 2008 in an attempt to stimulate economic growth by making it cheaper to spend than save.
As the economy has improved and job creation has accelerated, pressure is building on Fed Chair Janet L. Yellen and her colleagues to start raising interest rates.
Fed officials have signaled that they could start raising rates as early as June.
The timing, however, still appears to be hotly debated among Fed policymakers, according to the minutes of last month’s meeting.
“(M)any participants observed that a premature increase in rates might damp the apparent solid recovery” in economic activity and labor-market conditions, the minutes said.
Some policymakers expressed concern that inflation remained well below the Fed’s 2 percent annual target, pushed down sharply in recent months by the steep decline in oil prices.
The Fed’s preferred inflation measure, based on personal consumption expenditures, was 0.7 percent for the 12 months ended Dec. 31.
Some policymakers said the public could question the Fed’s commitment to 2 percent annual inflation if it started raising interest rates with inflation running so low, the minutes showed.
In assessing the risks of raising interest rates, many of the policymakers indicated that they were inclined to keep the rate near zero “for a longer time,” according to the minutes.
But the length of time wasn’t specified, and there was broad agreement that the decision would depend on economic data in the coming months.
Many Fed officials continued to worry about the effects of global economic troubles on the U.S. economy, though actions by other foreign central banks had reduced the risks, the minutes said.
Sharply lower energy prices were seen as “potentially exerting a stronger-than-anticipated positive effect on growth in the domestic economy and abroad,” according to the minutes.