Fed appears split on interest rate plans

WASHINGTON — The Federal Reserve raised interest rates on schedule during the first half of 2017, but its plans for the second half of the year are less clear, according to minutes of the Fed’s most recent meeting in June.

Officials debated how soon to start reducing the Fed’s securities portfolio, as the sluggishness of inflation and the exuberance of investors continued to concern them. At the June meeting, the Fed raised its benchmark interest rate for the third consecutive quarter, to a range between 1 percent and 1.25 percent. It also published a plan for paring its substantial holdings of $4 trillion in Treasurys and mortgage-backed securities, acquired after the financial crisis to further reduce business and consumer borrowing costs.

The Fed has said that it wants to begin the balance sheet plan this year. The minutes of the June meeting said several officials wanted to start “within a couple of months,” while others favored waiting, suggesting that officials are debating whether to begin in September or wait until December. The Fed published the meeting account Wednesday after a standard three-week delay.

Fed officials have made clear that they are committed to reducing the central bank’s support for economic growth after years of hesitation. The Fed plans to raise its benchmark rate once more this year, which it says would push the rate to a neutral level that neither encourages nor discourages growth.

But there are signs of emerging differences among Fed officials about the importance of two unexpected developments.

Some Fed officials worry that investors are not responding to the recent rate increases. It has become cheaper and easier to borrow money in many cases. That is the opposite of the effect the Fed intended. The minutes said some participants were concerned about “a buildup of risks to financial stability.”

William Dudley, the president of the Federal Reserve Bank of New York, has suggested the Fed might need to raise rates faster if markets continue to brush aside its retreat.

But Fed Chair Janet Yellen played down the extent of the Fed’s concerns at a news conference.

The lack of an expected level of 2 percent inflation, on the other hand, is causing some officials to question whether the Fed is moving too quickly.

The minutes had little effect Wednesday on Wall Street, where stocks finishedmixed.DougBurtnick of Aberdeen Asset Management said the Fed’s division makes investors put more emphasis on economic reports and other data.