Rent-to-own News - Most at Fed want rate hikes before asset sales

Most Federal Reserve officials prefer to raise rock-bottom interest rates before selling assets when the time comes to tighten policy, restoring their main tool for managing the economy, according to minutes of their April meeting.

The minutes, released on Wednesday, also showed worries about inflation rising among Fed officials last month before a big surge in oil prices subsided, according to Reuters.

During an extensive discussion of how the central bank might pull back its massive support for the world's largest economy, officials indicated unloading the mortgage debt the Fed piled on during the financial crisis would be a priority in eventually shrinking the Fed's $2.7 trillion balance sheet.

Policymakers felt that holding off on asset sales would allow them to get their target for overnight rates up from its current level near zero sooner than otherwise, the minutes showed. Fed officials have long felt discomfort that their main policy tool was essentially exhausted.

The U.S. central bank chopped rates to near zero in December 2008 and then pumped $1.4 trillion into the economy through purchases of mortgage and government debt.

In November, it launched a fresh program to buy $600 billion more of government bonds in an effort to keep borrowing costs down and spur a stronger recovery.

Now, its eyes are turning toward an eventual unwinding of its unprecedented stimulus and the minutes underscored that there would have to be a big threat to the recovery to spur a fresh round of asset purchases.

At the same time, however, the minutes stressed that the April discussion did not indicate the Fed was ready to start tightening policy any time soon.

The suggestion the day of the Fed's first tightening move could come sooner than thought caused long-term bond prices to slip and strengthened the dollar against the euro and the yen. Stocks, however, held earlier gains.

Policymakers worried that if oil prices continued to rise it could spill over into a wider range of prices. They also worried a self-fulfilling inflationary mind-set could take hold. Oil prices have dropped sharply since the meeting.

Some officials since the meeting have called for the Fed to quickly reverse course from its ultra-easy money policies. Others have made clear depressed jobs and housing markets continue to justify loose monetary policy.

U.S. inflation hit a 2-1/2 year high in April, but energy prices were largely to blame, analysts claim.