Economic Growth Pace Concerns Fed

Federal Reserve policymakers warned in March they would raise interest rates unless the economy slowed down soon but voted to keep them steady for the time being, minutes of a meeting released Thursday showed.

Even though most members of the central bank’s Federal Open Market Committee appeared pleased with the absence of any immediate inflation threat, they expressed concern about the roaring pace of growth and the nation’s steaming stock market.

Current inflation risks were such to “make some tightening a likely prospect in the not-too-distant future,” the summary of Fed officials’ discussions at their March 31 meeting stated.

The minutes revealed an unusually wide array of opinions on where the economy is headed. Yet 11 of the 12 voting members agreed the best option now was to keep rates on hold and adopt a “tightening bias,” indicating their readiness to tighten credit as the next move--a threat they did not follow up on at their most recent meeting on Tuesday.

“The thing that strikes me about the minutes is the extreme uncertainty about the economic outlook,” said David Jones, economist at Aubrey G. Lanston & Co. in New York.

One member of the committee, Cleveland Fed President Jerry Jordan, dissented from the majority view and argued for an immediate rate rise, citing strong growth in U.S. money supply, which he feared could stoke inflation.

Analysts said the minutes suggested a spirited debate among policymakers, whose respective conclusions on monetary strategy seemed driven by often conflicting economic data. Inflation remains subdued even though the unemployment rate has dropped to a 28-year low of 4.3%.

“There just is no consensus. That means watching and waiting,” Jones said.

The Fed remained in waiting mode this week when it left the key overnight federal funds rate--which determines borrowing costs throughout the economy--steady at 5.5%.