Fed considered changing bias toward raising U.S. interest rates, minutes show

Bloomberg News, Reuters
Published: February 21, 2007

NEW YORK: Federal Reserve policy makers were uncertain that inflation was firmly on a downward path at their last meeting and discussed whether to alter their bias towards tightening rates, minutes released Wednesday from their Jan. 30-31 meeting show. They ultimately rejected that idea because inflation was their "predominant concern."

"Participants did not yet see a downward trend in core inflation as definitively established," the minutes said.

Still, the central bank's policy-setting Federal Open Market Committee, which sets rates, stated that a combination of better-than-expected reports on the economy and inflation suggested that there were smaller risks to growth and improved prospects for core inflation.

Fed officials are trying to sort through the risks of a weak housing market that is offset by low unemployment, which is in turn generating gains in income and spending. The Fed discussed whether the language in its statement saying that it viewed risks as tilted toward inflation was the best way to represent its views, but decided no change was necessary "at this time."

At the meeting, the central bank held its benchmark U.S. interest rate steady at 5.25 percent, and renewed a warning on inflation risks, although it noted that the inflation picture had improved.