Meeting hints at possible cracks in Fed's unity

WASHINGTON — Several Federal Reserve policymakers were concerned last month about the risks of the Fed's efforts to boost the U.S. economy by keeping borrowing costs low for the foreseeable future.

Minutes of the Fed's Jan. 29-30 policy meeting, released Wednesday, showed some officials expressed concern that continuing the Fed's monthly purchases of $85 billion in Treasurys and mortgage bonds could eventually escalate inflation, unsettle financial markets or cause the Fed to absorb losses once it begins selling its investments.

In the end, the Fed voted 11-1 last month to keep its bond-buying program open-ended and at the same size in a program intended to keep interest rates down to encourage borrowing and spending.

The lone dissenter in the Fed's vote last month to continue its current policies was Esther George, president of the Fed's Kansas City regional bank.

The January minutes suggested that the discussion over the risks from the bond purchases was more extensive than at the Fed's December meeting.

The minutes of the January meeting showed that "several participants" thought the Fed should be ready to vary the pace of its purchases as it adjusts its view of the economy or the benefits and costs of the purchases. The policymakers asked Fed staffers to provide a deeper analysis at upcoming meetings of the issues raised in the discussion.

Private economists seemed divided Wednesday over how to interpret the debate described in the Fed's minutes.

Some pointed to the Fed's lopsided 11-1 vote last month for the current level of bond purchases as a sign that chairman Ben Bernanke commands a large majority for keeping the monthly purchases at $85 billion until the job market strengthens significantly.

Other analysts said the extensive discussion of the purchases at last month's policy meeting signaled rising concern about the risks of continuing the bond-buying program.

After reading the minutes, Paul Ashworth, chief U.S. economist at Capital Economics, said he thought it was possible that the Fed will decide to scale back its purchases as early as its next meeting, March 19-20.

The Fed is on its third round of bond purchases. Unlike the previous rounds, this one is open-ended: The Fed has said it will keep buying bonds until it sees substantial improvement in the job market. It also plans to keep a key short-term interest rate at a record low at least until the unemployment rate falls below 6.5 percent. It's now 7.9 percent.