FederalReserve officials are nearing a decision to lift rates in the first half of theyear, and minutes this week indicated they could decide as soon as April to takethe next step for policy normalization.

Thecentral bank released the minutes of the FOMC's last meeting on April 6, and theyshowed that a notable portion of policymakers continue to target a rate hike duringthe first half of the year — either at the committee's meeting later this month,or when it convenes in June. More specifically, and perhaps surprisingly for markets,the minutes said that policymakers had debated the merits of a rate hike in April,and that some members of the committee "indicated that an increase in the targetrange at the committee's next meeting might well be warranted." That groupincluded Federal Reserve Bank of Kansas City President Esther George, who ultimatelyvoted against the policy action in March and said she would have preferred the banklift its targeted fed funds range an additional 25 basis points then.

The Fednoted that there were "a range of views" on whether a rate hike wouldbe justified in April. With many investors still skeptical that the economic growthand inflation will pick up enough to justify a resumption of policy normalization— and that the bank will be reluctant to lift rates at a meeting withno press conference scheduled for Chair Janet Yellen — meeting members' opennessto an April interest rate increase was probably reason for pause.

Amongthose policymakers who may be inching toward advocating more tightening is FederalReserve Bank of Cleveland President Loretta Mester, who during a speech this weekargued that "financial conditions are only slightly more restrictive than theywere in December" of last year, when the Fed made its first move off the zero-ratebound and finally turned course to begin tightening monetary accommodation. Sheadded that despite headwinds the U.S. domestic economy has "proven to be remarkablyresilient." Mester also used a telling descriptor of her vote in favor of thatMarch policy action, saying she "did not dissent" from the decision. Thedistinction between that characterization and more simply saying she voted in favorof the policy action is minor — but in the world of Fed communications those minordistinctions often signal important policy differences or changes.

She wenton during her speech to suggest that the FOMC was not too moving slowly to normalizepolicy, but that it runs the risk of doing so quite soon. "There are alwaysrisks to waiting too long to take the next steps … waiting until every piece ofdata lines up in the correct way means waiting too long and risks having to moverates up more aggressively in the future," Mester said during her speech, echoingan argument that Yellen and other policymakers have made about why they have begunto tighten policy when, among other factors, inflation has fallen short of the centralbank's own targets for years.

She went on to argue that the bank should act even if marketsshow some jitters. "Forestalling rate increases for too long in light of financialmarket volatility that doesn't affect the outlook may simply produce more volatility,"Mester said.

Another data point highlighted in the minutes that will likelybolster the argument of hawks who hope to push policy tightening: The committeesaid that its preferred core inflation measure had risen 1.75% over the previous12 months. If further pricing info reflects that data, those policymakers wouldbe able to more successfully argue that the Fed needs to start closing the gap betweenrate levels and a sustained higher level of inflation.

The minutes said, though, that another group of policymakersdid not see that uptick in inflation as reason to fast-track a rate hike. "Severalexpressed … their concern that raising the target range as soon as April would signala sense of urgency they did not think appropriate," the Fed revealed in theminutes. What was less clear, and what markets will be watching closely as FOMCmembers make appearances before the next meeting, is which side comprises the majorityof the committee.