WASHINGTON (AP) - The Federal Reserve said last month that the economy is gradually improving and began discussing how it would reverse policies adopted during the recession that pumped billions of dollars into the economy.
Some members said the Fed might need to start boosting interest rates this year to guard against inflation. Any effort to tighten credit would lead to higher rates on some mortgages, credit cards and other consumer loans.
Fed policymakers didn't commit to taking any action at the April 26-27 meeting, according to minutes released Wednesday. But they agreed that if the economy continued its steady growth, the Fed would need to pull back on its massive stimulus programs and take steps to prevent consumer prices from getting out of control.
The officials generally agreed that the first step should be for the central bank to stop reinvesting money earned off its holdings of mortgages and Treasury securities. That's consistent with comments made by Federal Reserve Chairman Ben Bernanke at a news conference on April 27. But that would have only a limited impact on the rates Americans pay on loans.
A majority of participants said the best method for tightening credit would be to lift the federal funds rate, which is now at a record-low near zero. The federal funds rate is the interest banks pay each other on overnight loans. Most Fed officials said they preferred raising that rate before selling mortgage securities from the Fed's vast portfolio.
Some members thought the Fed would need to start signaling to investors that interest rates would need to rise. A few members believed the Fed might need to boost its key interest rate or start selling some of the assets in its portfolio this year.
The minutes don't identify what the individual Fed policymakers said.
The Fed's exit strategy is likely to be more complicated than ever before because of the extraordinary steps the Fed took during and after the recession to prop up the economy.