Some Federal Reserve officials think the U.S. economy is improving fast enough that the Fed will need to act sooner than previously thought to slow the extraordinary support it's been providing through ultra-low interest rates.
Minutes of the Fed's discussion at its July 29-30 meeting released Wednesday show that some officials thought the Fed would need ''to call for a relatively prompt move'' to reduce the stimulus it has supplied since the financial crisis erupted in 2008. Otherwise, these officials felt the Fed risked overshooting its targets for unemployment and inflation.
In the end, the Fed made no changes at the July meeting. It approved, 9-1, keeping its current stance on interest rates.
Still, the minutes revealed a sharp and perhaps intensifying debate within the Fed about how and when to scale back its help for a steadily improving economy.
Those who think the Fed should withdraw its support only slowly cited persistent drags on the job market despite solid hiring and a steady drop in the unemployment rate: High levels of people who have been unemployed for more than six months; many people who are working part time even though they want full-time jobs; and chronically weak pay growth.
In addition, the minutes showed that the Fed debated how to unwind the bond purchases it's made over the past six years to keep long-term rates low. Decisions such as how and when to start reducing its enormous investment portfolio - amounting to nearly $4.5 trillion - remain unsettled. The minutes showed that Fed officials expect to have more details on the process to announce before year's end.
There was also disagreement over what mix of tools the Fed should use to eventually raise rates. But ''almost all'' officials thought the Fed should keep its target for the federal funds rate, the rate which banks charge each other, as the key policy rate.
The Fed's target range for the funds rate has remained at a record low between zero and 0.25 percent since December 2008. The minutes stated that officials think the Fed should keep using a quarter-point range when it begins raising this rate, rather than specifying a specific rate.
Officials felt the size of the bond holdings should be reduced ''gradually and predictably'' over time to the smallest level possible that would be consistent with the Fed's policy. Before the crisis hit with force in the fall of 2008,