Fed Officials Debate Timing Of Interest Rate Hike

KELLY MCEVERS, HOST:

There's been a big debate at the Federal Reserve about when to begin raising its closely watched interest rate. That debate continued at the Fed's most recent meeting late last month. Minutes from that meeting are out and they have some things to tell us. NPR's John Ydstie reports.

JOHN YDSTIE, BYLINE: The most recent forecast from Fed officials suggests the first rate hike is likely to come some time in the second half of next year. But former Fed governor Randall Kroszner says minutes of the Fed's recent meeting show a number of officials believe the central bank should begin raising rates sooner.

RANDALL KROSZNER: Some Fed members believe that there's not very much slack in the economy, the employment rate is coming down and that we need to move quickly.

YDSTIE: But, the minutes also revealed that a majority of policymakers, including Fed chair Janet Yellen, are looking beyond improvements in the unemployment rate and believe the labor market still needs the Fed's help.

KROSZNER: Janet Yellen is focusing on long-term unemployed people who are part-time workers who would prefer to be full-time; who would be at the very low level of workforce participation. And looking at those factors suggests that there's still a long way to go for the labor market to recover.

YDSTIE: So far, subdued inflation has allowed the Fed to continue its stimulative low interest rate policy. But Kroszner cautions that inflation can become a threat quickly in an improving economy.

John Ydstie. NPR News, Washington.

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