Fed members saw need for ‘significant’ hikes

WASHINGTON — Federal Reserve policy-makers suggested that “significant” increases in short-term interest rates probably would be needed to keep inflation from becoming a problem, according to minutes released Thursday of their August meeting.

Federal Reserve Chairman Alan Greenspan and his colleagues on the Federal Open Market Committee — the group that sets interest rate policy in the United States — unanimously agreed at the Aug. 10 meeting to boost a key short-term interest rate by one-quarter percentage point to 1.5 percent.

“Given the current quite low level of short-term rates, especially when judged against the recent level of inflation, members noted that significant cumulative policy tightening likely would be needed to foster conditions consistent with the committee’s objectives for price stability and sustainable economic growth,” the minutes said. It didn’t elaborate on what “significant” meant.

The news came as a surprise to many bond traders, who had been betting since the last Fed meeting that the pace of rate increases might slow. The price of the 10-year note fell Thursday, pushing up its yield back above 4 percent after falling earlier in the day to 3.96 percent.