Fed officials discussed potential reduction in stimulus

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Federal Reserve officials started discussing at their meeting last month the timing and mechanics of reducing their huge monthly bond purchases, which are used to keep longer-term interest rates in check.

The debate, revealed in the minutes of the Fed's June meeting released Wednesday, reflected a broadly positive slot  outlook on the economy among Fed policymakers but also some concern that higher inflation could prove more persistent than the central bank has previously indicated. Still, economists saw little sign that the Fed was any closer to hiking interest rates or reducing its bond buys.

A few policymakers “mentioned that they expected the conditions for beginning to reduce” bond purchases would “be met somewhat earlier than they had anticipated ... in light of incoming data,” the minutes said.

The Fed is buying $120 billion a month in Treasury securities and mortgage-backed bonds to keep longer-term interest rates low and encourage more borrowing and spending. Those purchases have flooded financial markets with cash, potentially fueling asset bubbles, some economists have argued. The Fed has said that it will keep making the purchases until the economy makes “substantial further progress” toward its goals of full employment and an inflation rate slightly above 2%.