WASHINGTON (AP) – Some Federal Reserve officials last month raised the possibility of scaling back the Fed’s $600 billion Treasury bond purchase program out of fear that a strengthening economy could spur high inflation.
The minutes from the Fed’s Jan. 25-26 meeting were released on the same day that the government reported that a measure of wholesale inflation rose in January at its fastest pace in more than two years.
Still, Fed officials unanimously concluded at the policy meeting that inflation wasn’t a problem yet, and decided to stick with the pace and size of the bond-buying program. The bond purchases are intended to invigorate the economy by getting Americans to spend more.
The central bank also raised its forecast for economic growth for this year. The fear among some critics of the bond-buying program is that as consumers and businesses spend more, prices will rise at an unhealthy pace.
Minutes of the closed-door meeting released Wednesday showed that a few members said it might be appropriate to reduce the size of the program or slow it down if economic data point to “a sufficiently strong recovery.” The minutes never identify members.
The Fed expects the economy to grow between 3.4 percent and 3.9 percent this year. That’s up from its November forecast of between 3 percent and 3.6 percent.
Even so, economic growth still isn’t strong enough to quickly lower the unemployment rate, which is 9 percent.
The Fed foresees the unemployment rate hovering around 9 percent this year and falling as low as 7.6 percent next year, when President Barack Obama seeks re-election. Normal unemployment is closer to 5 percent or 6 percent.
The Fed projects inflation won’t exceed 1.7 percent this year, sticking with the high end of its range from the previous meeting.
Higher prices for energy and other commodities have boosted inflation recently, but most Fed members continue to believe that inflation will remain low. Fed officials debated whether they were…