Fed Seen Holding to Same Rate Pace

Inflation concerns dominated the discussion at last month’s Federal Reserve meeting, but by the end of it policymakers decided that price pressures weren’t severe enough to justify a faster pace of interest rate increases, according to the minutes of the meeting made public Tuesday.

Even so, the Fed appeared to warn that, before it is finished tightening credit, its key rate might go higher than it had expected.

The Fed’s report on its March 22 gathering left many analysts convinced that the central bank would stay on its self-described “measured” course of rate hikes -- meaning quarter-point increases in the benchmark federal funds rate at each meeting.

The minutes were “consistent” with a continuation of the quarter-point regimen, economists at Goldman Sachs & Co. said in a note to clients.

The Fed had spooked some investors in its statement issued after the March 22 meeting, when policymakers raised their key rate to 2.75% from 2.5%, the seventh increase since June. “Pressures on inflation have picked up in recent months,” the statement said, the Fed’s first inflation warning since 2000.

In the meeting minutes, Fed members were said to have discussed inflation in “particular detail.” Several said they feared that any surprisingly high inflation data could make rising prices self-fulfilling by stoking consumer and business expectations for more of the same.

Nonetheless, “members noted that an accelerated pace of policy tightening did not appear necessary at this time,” in part because of “economic slack,” the meeting minutes said.

But that passage was prefaced with a warning that “the required amount of cumulative tightening may have increased” -- which could mean that the Fed expects to continue raising rates for an extended period. The minutes also said that the term “measured” did not preclude a speed-up or a pause in rate hikes, if warranted.

Ian Sheperdson, an economist at High Frequency Economics in Valhalla, N.Y., said he believed the Fed “still has plenty to do” in lifting rates, but that it was likely to remain on its current quarter-point pace until at least August. The Fed’s next meeting is May 3.