updated 7/16/2008 3:12:19 PM ET 2008-07-16T19:12:19

Worried about rising inflation, Federal Reserve officials at their meeting in June thought the Fed’s next move on interest rates was likely to be up.

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Documents, released Wednesday, provided insights into the Fed’s thinking at the June 24-25 session, when they ended a nearly yearlong string of rate reductions, aimed at bolstering a teetering economy. At that time, Fed Chairman Ben Bernanke and his colleagues were increasingly concerned that galloping energy and food prices could spread inflation through the economy, so they left the Fed’s key rate at 2 percent.

“With increased upside risks to inflation and inflation expectations, members believed that the next change in the stance of policy could well be an increase,” according to the documents.

However, with all the economic uncertainty, the timing of any such increase was far from clear, the documents suggested.

Bernanke, in his most recent economic assessment — delivered to Congress on Tuesday and Wednesday — said the deepening housing crisis, a fresh bout of problems in financial markets and rising unemployment all have added to risks that the economy could lose speed. At the same time, he told lawmakers that inflation has remained high.

All that reinforced the belief that the Fed will leave rates alone when it meets next on Aug. 5.

In his Capitol Hill appearances over the last two days, Bernanke acknowledged that the situation is difficult for Fed policymakers as they try to chart a course of righting the economy and preventing inflation from getting worse.

Consumer prices shot up in June at the second fastest pace in 26 years, with two-thirds of the surge blamed on soaring energy prices, the government reported on Wednesday.

At the June meeting, one member — Richard Fisher, president of the Federal Reserve Bank of Dallas — wanted to increase rates. Fisher, who has a reputation for being extra vigilant on inflation, was the sole dissenter.

In the Fed minutes, most other members thought the outlook for both economic activity and for price pressures “remained very uncertain” and thus “the timing and magnitude of future policy actions was quite unclear.”

Nonetheless, Fed policymakers recognized that “circumstances could change quickly” and that they “might need to respond promptly to incoming information about the evolution of risks.”

Fisher, at the June meeting, wanted to boost rates because he believed the risk that inflation would fail to moderate had “increased substantially” between the Fed’s meetings in April and June.

He was especially concerned about changes in the behavior of businesses as more raised prices of their goods to cover their higher costs and protect their profit margins. The government on Tuesday reported that wholesale prices — prices of goods before they reach store shelves — had jumped 1.8 percent in June.

As part of the Fed’s June session, policymakers discussed the financial activities and conditions of big Wall Street firms, the minutes revealed.

In unprecedented action in March, the Fed agreed to temporarily open its emergency lending facility to investment firms, a privilege that commercial banks have had for years. The Fed also set up another facility where investment firms can exchange on a short-term basis certain mortgage-backed securities and bonds secured by federally guaranteed student loans for super-safe Treasury securities.

Fed policymakers talked about extending both programs for investment firms past year end given “continuing significant strains in financial markets,” the minutes said.

Longer-run issues also were discussed including tightening supervision of investment firms and possible measures to strengthen the functioning of financial markets, and thus, financial stability. No details were provided.

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