WASHINGTON -- Keeping inflation from overheating the economy remains the top concern of Federal Reserve policy makers, records of their most recent deliberations show.
The minutes from the Oct. 24-25 meeting, released yesterday, revealed that in their discussions about the economy's health and even as they decided to hold interest rates steady, Fed members worried more about the risk of inflation than the danger of the economy cooling too much.
"All members agreed that the risks to achieving the anticipated reduction in inflation remained of greatest concern," the Fed minutes said.
On Wall Street, stocks rose as the minutes reassured investors that the Fed had inflation in hand.
The minutes also revealed that Fed policy makers debated the pros and cons of "inflation targeting" -- numerically spelling out acceptable bounds for inflation. No decisions were reached and the discussion was expected to be resumed in 2007 at the Fed's first meeting of the year in late January.
Chairman Ben Bernanke favors the notion of an inflation target and believes it would help the central bank communicate more effectively with Wall Street and Main Street.
Even with their concern about inflation risks, Fed policy makers still stuck to their forecast that slowing economic growth and a calming of once surging energy prices will eventually lessen inflation pressures.
"Nearly all members expected that the economy would expand close to or a little below its potential growth rate and that inflation would ebb gradually from its elevated levels," the minutes stated.
Some recent inflation barometers released since the Fed's October meeting have suggested that inflation is settling.
The government reported on Tuesday that wholesale prices fell by a record 1.6 percent in October. The government will release a report on consumer prices today.
The October session marked the third Fed meeting in a row where a key interest rate was held steady at 5.25 percent.