WASHINGTON – Keeping the economy from overheating with inflation remains the top concern of Federal Reserve policymakers, records of their most recent secret deliberations show.
The record of their Oct. 24-25 meeting, released Wednesday, revealed that in their discussions about the economy's health, the Fed members worried somewhat more about the risk of inflation than the danger of the economy cooling down too much.
"All members agreed that the risks to achieving the anticipated reduction in inflation remained the greatest concern," the Fed minutes said.
The minutes also revealed that Fed policymakers debated the pros and cons of "inflation targeting" — numerically spelling out acceptable bounds for inflation. No decisions were reached and the discussion was expected to be resumed in 2007 at the at the Fed's first meeting of the year in late January.
Ben Bernanke, who took over as Fed chairman in February succeeding Alan Greenspan, favors the notion of an inflation target and believes it would help the central bank communicate more effectively with Wall Street and Main Street.
Even with their concern about inflation risks, Fed policymakers still stuck to their forecast that slowing economic growth and a calming down of once surging energy prices will eventually lessen inflation pressures.
"Nearly all members expected that the economy would expand close to or a little below its potential growth rate and that inflation would ebb gradually from its elevated levels," the minutes stated.
Some recent inflation barometers released since the Fed's October meeting have suggested that inflation is settling down.
The government reported on Tuesday that wholesale prices fell by a record 1.6 percent in October. The government will release a report on consumer prices on Thursday.
Although substantial uncertainty continued to attend the Fed's outlook, "most members judged that the downside risks to economic activity had diminished a little, and likewise, some members felt that the upside risks to inflation had declined, albeit only slightly," the minutes said.