04/05/2011 04:23 pm ET Updated Dec 06, 2017

Federal Officials Split Over Continuation Of Bond Buying Program, Minutes Reveal

WASHINGTON (By Mark Felsenthal and Glenn Somerville) - Some Federal Reserve officials last month believed they would have to hold to an easy monetary policy course beyond this year while a few said the central bank should move to tighter conditions before year-end.

In a similar example of divergent views, some members of the Fed's policy-making Federal Open Market Committee thought the central bank should cut short its $600 billion bond buying program if growth proved more robust or inflation higher. However, several others saw no need to make adjustments, according to minutes of the Fed's March 15 meeting, which were released on Tuesday.

The minutes showed officials increasingly concerned about inflation and the possibility an inflationary psychology might take root.

However, they concluded for the most part that higher inflation due to energy and commodity price spikes would be temporary, although they vowed to keep a watchful eye on whether consumers and businesses were beginning to expect higher inflation in the future.

"A significant increase in longer-term inflation expectations could contribute to excessive wage and price inflation, which would be costly to eradicate," the minutes said.

Staff told policymakers they could bring the bond-buying program to an end as planned June 30 without tapering purchases and not cause any market disruptions.

Several Fed officials said turmoil in the Middle East and the prospect of higher oil prices had made them shift their views of inflation risks to the upside.

As a result of these uncertainties, policymakers vowed to plan for an eventual exit from exceptionally easy monetary conditions based on a range of different economic scenarios.

(Reporting by Mark Felsenthal and Glenn Somerville; Editing by Neil Stempleman)

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