Based on those expectations, the FOMC clearly planned to keep raising its benchmark federal funds rate in small steps over many months. The minutes, using Fed jargon to describe the discussion, said the FOMC members "noted that significant cumulative policy tightening likely would be needed" to keep inflation tame and help the economy grow at a healthy, sustainable rate.
The minutes, which summarize the proceedings without identifying the participants by name, do not reveal whether they used specific numbers to describe what they envisioned as a "significant" increase in interest rates. But the minutes did describe the quarter-point increase that day as "a relatively small tightening move" -- implying that there were several more to come.
The minutes do not say how high the rate is likely to go next year, but they indicate that it is likely to remain relatively low even after upcoming increases.
The staff forecast that the economy "would continue to expand at a solid pace through 2005, supported by a relatively accommodative monetary policy," the minutes said.
In the Fed's parlance, "accommodative" means that the funds rate would still be low enough to stimulate economic growth. The rate influences many other interest rates, which are determined by financial markets, such as those for mortgages, credit cards and business loans. Low borrowing costs encourage businesses and consumers to spend more; high rates cause them to pull back.
The minutes also do not attach a number to "accommodative," as is the Fed's practice.
The Fed communicates its thinking and likely policy plans to the public through cryptic statements, the jargon-filled minutes and the speeches of individual FOMC members.
The statements issued after meetings often include key words or phrases that are chosen precisely because they can be interpreted broadly by the public, and differently by the various FOMC members. That wiggle room sometimes makes it easier for the members to agree to the language, while giving the group wide flexibility to respond to changing economic conditions.
Generally speaking, "accommodative," to Fed officials, is a rate somewhere below a "neutral" level that neither spurs nor slows growth.
The neutral rate varies with economic conditions, including the inflation rate, tax and spending policies, and the growth of productivity -- or output per labor hour. Fed Bank of Cleveland President Sandra Pianalto recently called it a "moving target."
Economists at the Fed and elsewhere offer a variety of possible ranges for the neutral rate now, from 3 percent to 5.5 percent. It has averaged around 4 percent for most of the period since World War II, by some economists' calculations.
