The Federal Reserve’s decision not to raise interest rates last month was a “close call” for several officials, according to new documents released Wednesday, underscoring the challenges facing the central bank in steering an economy that appears to be stuck in second gear.

The Fed has been debating the right time to increase its benchmark interest rate all year but has repeatedly deferred action. The Fed raised rates for the first time since the Great Recession in December, and investors have been on high alert since for any sign that the central bank might be ready to move again.

Minutes of the Fed’s meeting in September shed new light on the growing minority of officials who believe the time is ripe. Three members of the central bank’s policymaking committee publicly dissented from the decision to remain on hold: Kansas City Fed President Esther George, Boston Fed President Eric Rosengren and Cleveland Fed President Loretta Mester, all of whom wanted to raise rates at that meeting.

But even among those who supported waiting, some characterized the decision as a “close call,” according to the minutes, which do not identify any of the officials. And they indicated that they would be ready to act “relatively soon” if the job market continued to heal and the economy strengthened. “It was noted that a reasonable argument could be made either for an increase at this meeting or for waiting for some additional information on the labor market and inflation,” the minutes state.

In its official statement after the September meeting, the Fed said it opted to hold rates steady “for the time being.” The minutes show that many officials think the labor market is still healing, evidenced in part by the return of workers to the labor force, while inflation remains low. In a news conference last month, Fed Chair Janet Yellen said the economy “has a little more room to run.”

“Most of us judged that the case for an immediate increase in the federal funds rate is stronger, but that it would be sensible … to wait to see some continued progress,” Yellen said.

But several officials worried that waiting too long could force the Fed to raise rates abruptly if inflation got out of hand or the economy began to overheat – a move that could send the country back into recession. A few warned that years of ultralow interest rates could be sowing risks into pockets of the financial system. And a couple argued that further postponing an increase could threaten the Fed’s credibility: Officials had started the year anticipating as many as four rate hikes.

The documents show Fed officials grappling with how best to manage an economy that has been both remarkably resilient in the midst of global turmoil and also profoundly disappointing in its lack of depth.


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