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FOMC minutes show divide over cooling economy after hitting 'neutral' rate

A handful of Federal Open Market Committee participants disagree on whether the U.S. central bank should raise rates enough to actively slow the economy, minutes of the policy-setting group's latest meeting show.

Fed officials have differed on what they should do as they approach a "neutral" policy stance, where the Fed is no longer providing monetary stimulus but is also not restraining the economy.

Some Fed officials have started talking about eventually taking steps to bring economic growth down to more sustainable levels. Chicago Fed President Charles Evans, for example, has said the Fed should continue with its gradual rate hikes and take a "mildly restrictive" policy approach. But others have declined to go that far, emphasizing that the Fed should get to a neutral rate and perhaps pause there. That includes Atlanta Fed President Raphael Bostic and Dallas Fed President Robert Kaplan.

The minutes showed that a few participants in the meeting took a similar view, while a couple of others would not support a restrictive approach "in the absence of clear signs of an overheating economy and rising inflation." Participants are not necessarily current voters on the FOMC.

Fed Chairman Jerome Powell has not publicly committed to a position but has raised the possibility of taking a restrictive stance. On Oct. 3, he said the Fed "may go past neutral, but we're a long way from neutral at this point, probably."

The Fed raised its benchmark interest rate by 25 basis points during the meeting, and it removed language describing its policy stance as "accommodative." Officials' projections showed that more of them agree another hike this year is appropriate.

The Fed's preferred inflation gauge remained at the central bank's 2% goal in August. Some participants noted that because inflation had run below the Fed's target for many years, a "modest increase in inflation expectations" would help achieve sustained inflation around 2%.

Trade policy developments were cited as a source of uncertainty but were not directly cited as a risk, unlike in the previous meeting's minutes.