The minutes from the Federal Reserve Board’s last meeting show a group of policy makers still decidedly at odds over when and how the Fed should step back from four years of easy money policies.

For months a debate has simmered between supporters of the Fed’s bond buying program and insistence on historically low interest rates and opponents who believe those policies have run their course and could lead to runaway inflation.

Chairman Ben Bernanke and Vice Chairman Janet Yellen, who is widely expected to succeed Bernanke if the Fed chief isn’t nominated to a third term, lead the easy money wing of the Federal Open Market Committee (FOMC), which sets most monetary policy.

Richard Fisher, president of the Dallas Fed, and Charles Plosser, head of the Philadelphia Fed, are two outspoken inflation hawks who have come out publicly in favor of reeling in the Fed’s $85 billion a month bond purchasing program.

As economic data has veered back and forth in recent months, the debate has swung along in its path. Solid jobs reports earlier in the year prompted talk of backing off the easy money. That was followed by a disappointing March, which moved the chatter in the opposite direction. But the April jobs report proved a surprise to the upside, which spurred more talk of gradually scaling back on the bond purchases.

According to the Fed minutes from the April 30-May 1 meeting, which was held before May’s unemployment numbers were released: "A number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting if the economic information received by that time showed evidence of sufficiently strong and sustained growth; however, views differed about what evidence would be necessary and the likelihood of that outcome."

Meanwhile, a majority of FOMC members were focused on jobs: "Most observed that the outlook for the labor market had shown progress since the program was started in September," according to the minutes.

"But many of these participants indicated that continued progress, more confidence in the outlook, or diminished downside risks would be required before slowing the pace of purchases would become appropriate."

Clearly the debate is not only over what the timing should be but what benchmarks should be used, and also the size of any bond buying pullback. Do they cut the purchases by half? By three-quarters? There doesn’t seem to be a consensus.

The Fed has vowed not to raise interest rates from their historically low range of 0% - 0.25% until the unemployment rate hits 6.5%, a benchmark that still seems a long way off.

During Congressional testimony Wednesday morning, Bernanke said high unemployment remains a top concern of the Fed.

The Fed chairman said “high rates of unemployment and underemployment are extraordinarily costly.”

“Not only do they impose hardships on the affected individuals and their families, they also damage the productive potential of the economy as a whole by eroding workers’ skills and -- particularly relevant during this commencement season -- by preventing many young people from gaining workplace skills and experience in the first place,” he said.

The Fed minutes reflect the FOMC’s concern that while some sectors appear to be gaining momentum -- notably housing -- too many other areas of the economy are still lagging.

"Economic data releases over the intermeeting period were mixed, raising some concern that the recovery might be slowing after a solid start earlier this year, thereby repeating the pattern observed in recent years,” the minutes state.

“Various views on this prospect were offered, from those participants who put more emphasis on the underlying momentum of the economy, noting the strengthening in private domestic final demand, to those who stressed the growing fiscal restraint or the other headwinds still facing the economy."

As long as the economic data remains mixed and below realistic expectations for a sustained recovery, the debate over when and how to pull back the reins on easy money will continue and probably grow louder.

The Fed next meets on June 18-19.

 

 

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