The Federal Reserve has entered 2018 without a clear plan for raising its bench mark interest rate and with the added uncertainty of an imminent change in its leadership.
An account of the Fed's final meeting of 2017, which the central bank published on Wednesday, said officials generally agreed that the Fed should continue to raise its bench mark interest rate in the new year. But the frequency of future hikes remains a question, with a range of views among officials.
Six of the 12 officials on the Federal Open Market Committee predicted in December that the Fed would raise rates three times this year. But three other officials predicted a pair of hikes, and three officials said the Fed would raise rates four times.
Last year was the first since the 2008 financial crisis that the Fed articulated a clear plan for monetary policy, and stuck with it. The central bank said it would raise rates three times and did exactly that, with the third rate hike coming at its final 2017 meeting in December.
At that meeting, the Fed demonstrated its optimism about the economy by raising its bench mark interest rate to a range between 1.25 per cent and 1.5 per cent.
Officials saw few serious dangers on the horizon, the account said.
One new item on the agenda at the December meeting: concern about a technical indicator called the yield curve, which compares the interest rates on the different kinds of borrowing by the federal government, which range from one-week loans to 30-year loans.
In general, investors demand higher interest rates on longer-term loans, but the difference between short-term rates and long-term rates has been compressing. When short-term rates exceed long-term rates, the yield curve is said to be "inverted". Historically, that often happens before a recession.
Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, voted against raising the Fed's bench mark rate at the December meeting. He said in a statement that the flattening of the yield curve indicated that the Fed was moving too quickly.
The minutes said most Fed officials did not share Kashkari's concerns, judging instead "that the current degree of flatness of the yield curve was not unusual by historical standards".
The account also noted that some officials thought further flattening of the yield curve "would not necessarily foreshadow or cause an economic downturn".
The New York Times