Policy-makers at the Federal Reserve, fearing that a slowing in the growth rate of the economy might have been temporary, decided at their November meeting to tilt toward higher interest rates, according to minutes of that session released Friday.
The Federal Open Market Committee, which establishes monetary policy for the central bank, voted 11-1 on Nov. 1 to leave policy unchanged for the time being.But, in a directive to the Federal Reserve Bank of New York, the committee said "somewhat greater reserve restraint might be acceptable" depending on inflation and the strength of the economy and called for "remaining especially alert to potential developments that might require some firming" of monetary policy.
The New York bank buys and sells government securities owned by banks to drain or swell the amount of reserves the banks have to make loans, and thus influence the price, or interest rate on those loans.
The Fed, whose main job is to guard against inflation, is seeking to slow the growth of the economy as measured by the gross national product from the 3 percent to 3.5 percent range to a level it considers sustainable without inflation, between 2 percent to 2.5 percent.
In late March, it began a series of credit tightening moves, culminating in August with a one-half percentage point increase to 6.5 percent in its discount rate, the interest it charges to make bank loans.
Economic statistics for August and September led some economists to conclude that the policy was succeeding in dampening the economy. But figures for October and November show a rebound. Unemployment is near a 14-year low and factories are using more of their capacity than at any time in nine years, a development economists say could lead to shortages and price increases.
Market participants say it became clear this week that the Fed decided to begin nudging interest rates higher again. The federal funds rate, the rate at which banks make overnight loans among themselves, rose from about 8.4 percent on Tuesday to 8.9 percent Friday.
Consumer rates have responded by also heading higher.