"Several participants emphasised that if inflation continued to run high, the committee should be prepared to modify the pace of asset purchases and raise the target range for the federal funds rate sooner than expected," the Fed’s policy-making FOMC, or Federal Open Market Committee, said in the minutes of its November 2-3 meeting.
The Fed has been buying $120 billion of bonds and other assets each month to support the economy since the outbreak of the COVID-19 pandemic in March 2020. The central bank has said it will taper $15 billion of that each month beginning this month.
"Some participants preferred a somewhat faster pace of reductions that would result in an earlier conclusion to net purchases," the FOMC meeting minutes said.
When the Fed is done with its stimulus taper is crucial to financial markets as it will be an indication of when the central bank will be ready to raise rates, held at between zero and 0.25% for almost two years now.
Fed Chairman Jerome Powell has indicated that there will be no rate hike until the central bank finishes with its stimulus taper, which is expected to conclude by mid-2022. Some Fed officials are pushing for a hike by the first quarter of next year though.
The US economy itself shrank 3.5% in 2020 due to shutdowns and other disruptions caused by the coronavirus pandemic. Growth this year has been spotty, with an annualized 3.5% expansion in the first quarter, 3.6% in the second and 2.1% in the third.
The Fed announced in March that it expected a 6.5% economic expansion for all of 2021 and has not changed its target despite the uneven growth in the past three quarters. The problem for the central bank though is inflation as wages and the prices of almost everything have soared from the lows of the pandemic.
The Labor Department reported earlier this month that the US Consumer Price Index, which represents a basket of products ranging from gasoline and health care to groceries and rents, rose 6.2% during the year to October. It was the fastest growth of the CPI since November 1990, an acceleration driven mostly by pump prices of fuel running at seven-year highs.
Powell and Fed officials who share his thinking have described current price pressures in the economy as "transient," meaning things could return to normal once pandemic-related disruptions in labor and materials supply get sorted out. The Fed’s own tolerance for inflation is supposed to be at just 2% per annum.