Some Fed officials want to announce the beginning of the process "within a couple of months", according to minutes of the USA central bank's June meeting released Wednesday.
But a few Fed officials were less comfortable than the prospect of higher rates as implied by the central bank's June projections, saying that too quick a path might prevent a "sustained" return to inflation at that level.
The market consensus is toward a start in September, which would likely push another interest rate hike to the end of the year despite the Fed's optimism that stubbornly weak inflation will pick up. This assessment would take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and global developments. Market-based measures of inflation compensation remained low; survey-based measures of longer-term inflation expectations had changed little on balance.
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Yet in comments to CNBC last week, St. Louis Fed President James Bullard argued that Fed should delay further rate hikes until it sees what kind of policies Congress and the Trump administration propose.
After that meeting, the Fed announced it planned to start reducing the balance sheet sometime this year but provided no timetable.
Some policymakers since then, however, have shown increasing worry about the Fed's struggle to get inflation back to its 2 percent objective.
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William Dudley, the president of the Federal Reserve Bank of NY, has suggested the Fed might need to raise rates more quickly in order to achieve its goals. The rate-setting committee is next scheduled to meet to decide interest rate policy on July 25-26. Fed Chairwoman Janet L. Yellen will hold her quarterly news conference after the July meeting, which would allow her to explain the start of the balance sheet reduction plan.
Regarding interest rates, the Fed said "economic conditions would evolve in a manner that would warrant gradual increases in the federal funds rate". The minutes said some participants see evidence that investors are taking larger risks and a few are concerned about "a buildup of risks to financial stability".
Policymakers were also divided on when to unwind the Fed's $4.5 trillion investment holdings of government debt accumulated in the wake of the 2008 global financial crisis. Any profit the Fed has at the end of the year must be sent to the U.S. Treasury.
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