US central bankers sent a strong message Wednesday that an expansion with "substantial underlying economic momentum" could sustain additional increases in interest rates this year.
Federal Reserve officials at their January meeting saw a brightening global economic picture and the effects of recently passed tax cuts raising the prospect for solid growth and continued interest rate increases.
The use of the term "further" was the subject of intense debate among economists.
Their collective position on inflation, meanwhile, remained one of cautious optimism that it will move toward their 2 percent target in the medium term.
These events weren't captured in the Fed's minutes.
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The next FOMC meeting is scheduled for March, when the Fed is widely expected to announce another rate hike, this one likely up to a target rate of 1.5 percent to 1.75 percent.
"If the economy evolves as I anticipate, I believe further increases in interest rates will be appropriate this year and next year, at a pace similar to last year's", Loretta Mester, president of the Federal Reserve Bank of Cleveland, said earlier this month. Retail sales unexpectedly declined from the prior month.
Economists at UBS Group AG, Nomura Securities and Oxford Economics in the past week raised their projections for rate increases, joining other prominent forecasting shops that had already projected four quarter-percentage-point increases in the Fed's benchmark short-term interest rate this year.
Investors were reacting to data, including wage increases, that suggested inflation might be stronger than in recent years, prompting the Fed to raise rates more quickly.
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At their December meeting, officials penciled in three rate increases for this year and two for 2019. The possibility of higher inflation resulting from the tax cuts and spending increases could even make the Fed likelier to tighten credit. Private analysts have boosted their outlook to 2.6 percent, according to the median forecast in a Bloomberg News survey.
The minutes of the Fed's January 30-31 discussions showed that the officials were more optimistic about the economy than they had been in December. Several cautioned that "imbalances in financial markets may begin to emerge as the economy continued to operate above potential", the minutes said.
The minutes also show the Fed officials commenting on the likely effects of the tax reform bill passed at the end of a year ago.
Investors fear that low unemployment, increasing US growth and rising wages will spur the Fed to raise interest rates at a quicker pace, which would boost the cost of borrowing money.
The January meeting opened with staff presentations on inflation.
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That would "allow participants to assess whether incoming information on inflation showed that it was solidly on track toward the committee's objective".