Members of the Federal Reserve's monetary policy panel expressed concern at their March meeting that keeping interest rates low for so long could cause problems, meeting minutes released Thursday showed.
"Some members were concerned that keeping monetary policy stimulative for so long might be encouraging increased leverage and excessive risk-taking," the minutes said.
"Such developments could heighten the potential for the emergence of financial and economic instability when policy tightening proved necessary in the future."
At its March meeting, as it did on Tuesday, the Federal Open Market Committee left its key borrowing rate at one percent, its lowest level since 1958.
The Fed has left rates at those lows since June 2003. From 2001 to 2003, the Fed cut its key fed funds rate 13 times, in a failed attempt to avoid the 2001 recession and later to boost the economy against headwinds caused by a the Sept. 11 attacks and a sluggish recovery.
On Tuesday, it hinted its next move will be to raise rates and said in a statement the risks to its goal of price stability "have moved into balance." That differed from March's statement, which mentioned the possibility of "an unwelcome fall in inflation."
The minutes released Thursday showed the panel debated then whether to change its official stance on the likelihood of rising or falling inflation, a move that could have caught financial markets by surprise.
"Many members held that a case could be made for moving to a balanced risk assessment with regard to the outlook for inflation, with a number of them expressing a marginal preference for such a change," the minutes said.
"However, other members thought the evidence for a balanced risk assessment was not yet compelling," the minutes said.
The FOMC generally saw the danger from inflation as minimal."Despite the rise in energy and commodity prices and reports of increased pricing power in some sectors, many Committee members commented that persisting slack in labor and output markets would keep inflation low."
The panel "continued to see conditions in place for further solid economic growth," the minutes said. It also noted that the panel foresaw "vigorous growth" in investment spending by businesses, aided by productivity gains, high profits and favorable financial markets.