Fed considers tighter credit as economy improves

Key word here is considers. Debate and action are two separate issues. Enacting policies to tighten credit while recent data reveals a broad based contraction would be politically unwise.

The Federal Reserve last month began debating how it should start reversing policies that pumped billions of dollars into the economy during the recession. Some members said the Fed might need to start boosting interest rates this year to guard against inflation.

Fed policymakers didn't commit to taking any action at the April 26-27 meeting, according to minutes released Wednesday. But they agreed the economy was improving and if that continued the Fed would need to remove its massive to prevent consumer prices from getting out of control.

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. Raising that rate would likely precede sales of mortgages or Treasury securities in its vast portfolio.

Source: finance.yahoo.com