U.S. Fed debates when to hike rates

Minutes released Wednesday show the U.S. Federal Reserve last month began debating when it should start increasing interest rates.

Members of the central bank's monetary policy committee discussed how it should start reversing policies that pumped billions of dollars into the economy during the recession.

Some members said the Fed might need to start boosting interest rates this year to guard against inflation.

Fed policymakers didn't commit to taking any action at the April 26-27 meeting, but they agreed the economy was improving and if that continued the Fed would need to remove its massive stimulus to prevent consumer prices from getting out of control.

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.

"We believe the Fed will not raise the federal funds rate until January 2012," Martin Schwerdtfeger, an economist with TD Bank said in a commentary.

"However, if over the coming months medium-term inflation expectations drift higher and the latest gains in job creation persist," he said, "the Fed will run the risk of being seen falling behind the curve.  This could prompt them to act sooner."

Some members thought the Fed would need to start signaling that record-low interest rates would need to rise. That would lead to tighter credit and higher rates on consumer loans.

The minutes don't identify what the individual Fed policymakers said.