By DPA,
Washington : The US Federal Reserve has grown slightly more optimistic about the pace of the US economic recovery, leading some members to ponder raising interest rates and shrinking the central bank’s massive balance sheet in the near future.
Minutes released Wednesday of the Fed’s interest rate-setting meeting in late January showed that members believed the world’s largest economy was increasingly gathering steam, though unemployment was expected to remain stubbornly high for the next year.
“Several” members of the Fed’s board suggested the central bank should start selling off assets in the “near future” in a bid to lower its balance sheet of more than $2 trillion. The Fed has unleashed a series of unprecedented lending programmes for banks over the past two years to help pull the financial sector out of crisis.
One member, Thomas Hoenig of the Federal Reserve Bank of Kansas City, argued that the Fed should change its long-running language that interest rates will remain at their record low “for an extended period”.
Hoenig suggested the benchmark federal funds rate should remain near 0 percent “for some time,” giving the Fed more room to start raising rates. The disagreement over language led him to vote against the Fed’s last rate-setting statement Jan 27.
The Fed has held interest rates at their record low since December 2008 in an effort to pull the US economy out of its worst recession since the Great Depression of the 1930s.
The central bank slightly raised the bottom end of its economic forecasts. The US economy will grow between 2.8 percent and 3.5 percent this year, the Fed said, up from a range of 2.5 percent to 3.5 percent that was predicted in November.