'Dovish' minutes of the Dec. 16 policy meeting suggest that next rate increase may be delayed.
While the 10 voting members of the Fed's Open Market Committee, which makes a decision on interest rates every month, voted unanimously to hike rates to the range of 0.25 to 0.50 percent from 0 to 0.25 percent, a number of committee members expressed grave concern about the slow progress made by the U.S. economy on inflation.
"Although a jump in energy prices pushed up headline inflation somewhat, core consumer price inflation remained subdued," the minutes noted. The core inflation indicator strips out energy and food prices.
The annual rate of U.S. inflation has hovered close to zero for the past six months. The Fed has set a target of close-to two percent as key for the economy.
There is considerable disagreement, expressed in the minutes, among members about the inflation outlook in the coming year.
This split on the inflation outlook could well delay the Fed's projected four rate hikes this year.
What the committee members do agree on is that the U.S. economy is improving.
The minutes noted that consumer spending and industrial production had made good progress. Wages also increased markedly:
"Revised data showed solid increases in hourly compensation in the second and third quarters, along with quite rapid productivity growth and a further decline in unit labor costs," the minutes noted.
Some committee members felt that wage increases might fuel inflation in the new year.
There was general agreement that the Fed's policy has been effective, and that the outlook for the U.S. economy was positive, despite volatile global conditions.
"Participants generally saw the downside risks to U.S. economic activity from global economic and financial developments, although still material, as having diminished since late summer."
So the committee made the decision to raise interest rates in December, but would not agree on the timing of future rate hikes.
"Almost all participants agreed that the improvements that had occurred in the labor market and their confidence in a return of inflation to 2 percent over the medium term now satisfied the committee's criteria for beginning the policy normalization process," the minutes said.
What they do not agree on, apparently, is when to continue the process, and so rates could stay at current levels for some time.