Fed discussed ‘fairly soon’ timing for possible rate hike

WASHINGTON — Federal Reserve officials three weeks ago discussed the need to raise a key interest rate again “fairly soon,” especially if the economy remains strong.

Minutes of the discussions released Wednesday showed that while Fed officials decided to keep a key rate unchanged at their Jan. 31-Feb. 1 meeting, there was growing concern about inflation if the economy outperformed expectations.

“Several” Fed officials expressed worries that unemployment could fall substantially below the Fed’s 4.8 percent unemployment goal. That could trigger inflation pressures that would require the Fed to boost rates at a faster pace than financial markets currently expect. Unemployment in December was 4.7 percent, although it inched back up to 4.8 percent in January.

Most economists had indicated they did not foresee a rate hike until June. But the discussion in the minutes might increase the possibility of a rate increase as soon asMarch.

Financial markets lost ground immediately after the minutes were released, with investors worried about a potentialMarch rate hike. Stocks ended near flat. The minutes showed that a couple of Fed officials suggested the central bank might need to alter the wording of its policy statement because currently the Fed’s assurances that it planned to raise rates at a “gradual” pace could be “misunderstood as a commitment of only one or two rate hikes per year.”

Fed officials spent time discussing the proposed economic program of President Donald Trump and its possible impact on the economy, although the minutes never mentioned Trump by name.

“Most participants continued to see heightened uncertainty regarding the size, composition and timing of possible changes” togovernment tax and spending, the minutes said.

While some Fed officials said the central bank should notwait until the outlines of Trump’s program became clearer before raising rates, others urged more caution.

This grouparguedagainst “adjusting monetary policy in anticipation of policy proposals that might not be enacted or that, if enacted, might turn out to have different consequences for economic activity and inflation than currently anticipated.”