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Fed notes reveal its bond-buying fears

WASHINGTON — Several Federal Reserve policy makers suggested last month that the Fed might have to scale back efforts to keep borrowing costs low for the foreseeable future.

Minutes of the Fed’s Jan. 29-30 policy meeting released Wednesday showed that some officials worried about the Fed’s plan to keep buying $85 billion in bonds each month until the job market has improved substantially. They expressed concern that the continued purchases could eventually escalate inflation, unsettle financial markets, or cause the Fed to absorb losses once it begins selling its investments.

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According to the minutes, some Fed officials thought an ongoing review of the bond purchases might lead the policy committee to slow or end its purchases ‘‘before it judged that a substantial improvement in the outlook for the labor market has occurred.’’

In the end, the Fed voted 11 to 1 last month to keep its bond-buying program open-ended and at the same size. It said in a statement that the purchases would continue until the job market improved substantially. The bond purchases are intended to keep interest rates down to encourage borrowing and spending.

Still, the January minutes suggested that the discussion about risks from the bond buying was more extensive than at the Fed’s December meeting. Minutes of the December meeting had also pointed to divisions among Fed officials on how long the purchases should continue. The debate within the Fed has fed speculation that the bond purchases might be scaled back or ended this year.

Stock prices fell after the release of the minutes. The Dow Jones industrial average closed off more than 100 points. Before the release of the minutes, the Dow had been down only about 25 points..

The value of the dollar rose against other major currencies. Traders anticipated that US interest rates could rise, and potentially strengthen the dollar.

The minutes showed that ‘‘several participants’’ thought the Fed should be ready to vary the pace of its purchases as it adjusts its view of the economy or the benefits and costs of the purchases.

Private economists seemed divided Wednesday about how to interpret the debate described in the Fed’s minutes.

Some pointed to the Fed’s lopsided 11-to-1 vote last month for the current level of bond purchases as a sign that Fed chief Ben Bernanke commands a large majority for keeping the monthly purchases at $85 billion until the job market strengthens significantly.

Other analysts said the extensive discussion of the purchases at last month’s policy meeting signaled rising concern about the risks of continuing the bond-buying program.

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