Federal Reserve (search) policy-makers believed more interest-rate increases would be needed to keep inflation tamped down when they nudged credit costs up three weeks ago, according to minutes of the meeting released on Tuesday.

"Even after today's action, the federal funds rate (search) would likely be below the level that would be necessary to contain inflationary pressures, and further rate increases probably would be required," the minutes said.

The policy-setting Federal Open Market Committee (search) raised the overnight borrowing rate by a quarter-percentage point on September 20, taking it to 3.75 percent. It was the 11th consecutive quarter-point hike in a string dating back to June 2004.

Fed Governor Mark Olson (search) dissented from that decision -- the first dissenting vote since June 2003. The minutes said Olson preferred to hold rates steady to await further data on how Hurricane Katrina, which struck the Gulf Coast in late August, would affect the economy.

The meeting minutes showed officials worried a surge in energy prices in the wake of Hurricane Katrina had raised inflation risks and believed the U.S. economy would soon regain its feet after the devastating storm.

"A pause in policy tightening at this meeting had the potential to mislead the public both about the committee's perceptions of the fundamental strength and resilience of the economy and about its commitment to fostering price stability," they said.

"With growth of the economy expected to recover, meeting participants were concerned that price pressures, which had been elevated before the storm, could climb further, primarily as a result of additional increases in energy prices," the minutes said.

Officials expressed concern over a "worrisome loss of fiscal discipline" and an expected increase in federal spending on post-hurricane reconstruction efforts, which would provide economic stimulus at a time when the economy had little slack.

The minutes said surging energy prices would likely push up inflation, even outside the volatile food and energy area, for a time and could prove a more-persistent influence if expectations of higher inflation became ingrained.

According to the minutes, "some sentiment" was expressed that changes to the Fed's post-meeting statement might be warranted in the future, partly because of the "considerable reduction" in the degree to which interest rates were boosting the economy.

In its post-meeting statement on September 20, the Fed reiterated that it was likely to push rates higher at a "measured pace."