WASHINGTON — 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 Wednesday, the same day 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 — projecting that it won’t exceed 1.7 percent this year, despite a recent boost from higher energy and commodity prices — 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 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 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 at 9 percent.
Some members also raised concerns that businesses might suddenly increase retail prices “substantially” when the economy gains more momentum. For the most part, companies have had only a limited ability to jack up prices to cover higher costs for fuel and raw materials. That has helped to keep inflation low at the consumer level.
“The factors affecting the ability of businesses to pass through higher prices to consumers were viewed as complex and hard to monitor in real time,” the Fed minutes acknowledged.
Any hint of high inflation will probably prompt Fed members to discuss cutting off the program before June 30, when it is scheduled to end.
