Minutes Suggest Fed Close to Pausing

Federal Reserve officials were uncertain at their June meeting about future interest rate steps and wanted to see more data before deciding whether any more tightening was needed, minutes of the meeting released Thursday showed.

Also Thursday, Fed Chairman Ben S. Bernanke told a congressional panel that there was room for U.S. workers’ wages to grow and reason to expect it.

In a second day of testimony on the U.S. central bank’s semiannual economic forecast, Bernanke told the House Financial Services Committee that he expected inflation to moderate and said a wage rise would not impede that.

“Increases in real wages are entirely consistent with low inflation, there is no contradiction,” he said in response to a string of questions from lawmakers, who said average Americans feel pinched by rising energy and other costs.

The Fed chief reiterated that the economy was in transition toward slower growth and that the shift would help contain prices, remarks that sparked a sharp rally in stock markets Wednesday when he testified before the Senate Banking Committee.

Minutes from the June 28 and 29 Federal Open Market Committee meeting reinforced an impression that policymakers were near pausing a long-running rate-increase campaign.

“With the economy slowing and some of the effects of past tightening still in the pipeline, members recognized the value of accumulating more information for determining what, if any, additional policy action would be needed following the tightening adopted at the current meeting,” the minutes said.

“Many members noted that significant uncertainty accompanied the appropriate setting of policy going forward, and one indicated that the decision to raise the target federal funds rate at this meeting was a close call,” the minutes said.

Analysts said the minutes, along with Bernanke’s comments to Congress that growth is moderating and that inflation pressures are likely to ease as a result, suggested that the Fed was grappling with the question of whether further interest rate increases were needed.

“All of these reports, whether they be the minutes or Bernanke’s testimony, are hinting that they are preparing the market to pause,” said George Goncalves, a Treasury market strategist at Banc of America Securities in New York.

The Fed decided in June to raise short-term interest rates a 17th consecutive time to 5.25%. In announcing that action, the Fed said moderating growth should help ease price pressures, even though it held out the possibility that it could extend its two-year tightening campaign.

The minutes made clear that Fed officials were concerned about a recent pickup in the core inflation rate and debated the extent that the rise might be transitory or more persistent.

“All participants found the elevated readings on core inflation of recent months to be of concern and, if sustained, inconsistent with the maintenance of price stability,” the minutes said.