Federal Reserve officials last month kept a key interest rate unchanged but saw the decision as a "close call." Many believed that the case for a rate hike had strengthened in recent months.
Minutes of the Sept. 20-21 meeting of the policy-setting Federal Open Market Committee, released Wednesday, showed officials were inching closer to hiking rates for the first time since last December. But they decided to hold off, given that inflation was still running below their 2% target and there was little sign of rising wage pressures.
The minutes said that some officials believed it would be appropriate to raise rates "relatively soon" if the labor market kept improving.
Many economists expect the Fed officials to keep rates unchanged at their next meeting in November, but then raise rates by a modest quarter-point in December.
The minutes of the September meeting were released after a customary three-week lag. After that meeting, the Fed announced that it was keeping its key interest unchanged but sent a strong signal that it could raise rates before year's end.
The decision was approved on a 7-3 vote with a rare three dissents. Three presidents of Federal Reserve regional banks — Esther George of Kansas City, Loretta Mester of Cleveland and Eric Rosengren of Boston — all dissented. All wanted the Fed to raise rates at the September meeting.
Deep divisions were evident in the minutes, which said that the officials pushing for an immediate rate hike were concerned that further delay risked eroding the Fed's credibility, "given that recent economic data had largely corroborated the committee's economic outlook."
But the majority of Fed officials argued for delay, contending that inflation was still very low and that there was still room for the unemployment rate to fall further without triggering high inflation.
Last week, the government reported that employers added 156,000 jobs in September, fewer than the 167,000 in August and well below last year's monthly average of 230,000.
Analysts believe that the central bank will wait until its last meeting of the year in December before raising rates. The Fed's next meeting is Nov. 1-2., but it's not expected to make a move then, given that it will be just a week before the presidential election.
In December last year, the Fed hiked its benchmark lending rate after leaving it at a record low near zero since December 2008.