Federal Reserve considers tighter credit

WASHINGTON -- The Federal Reserve has begun discussing how it would reverse policies adopted during the recession that pumped billions of dollars into the economy.

At a meeting last month, some members said the Fed might need to start boosting interest rates this year to guard against inflation. Any effort to tighten credit would lead to higher rates on some mortgages, credit cards and other consumer loans.

Fed policymakers didn't commit to taking any action at the April 26-27 meeting, according to minutes released Wednesday. But they agreed that if the economy continued its steady growth, the Fed would need to pull back on its massive stimulus programs and take steps to prevent consumer prices from getting out of control.

The officials generally agreed that the first step should be for the central bank to stop reinvesting money earned off its holdings of mortgages and Treasury securities. But that would have only a limited impact on the rates Americans pay on loans.

A majority of participants said the best method for tightening credit would be to lift the federal funds rate, which is now at a record-low near zero. The federal funds rate is the interest banks pay each other on overnight loans. Most Fed officials said they preferred raising that rate before selling mortgage securities from the Fed's vast portfolio.