Higher gas prices weakened U.S. economic growth early this year in the eyes of one Federal Reserve official, while other policy-makers worried about the potential inflationary impact of energy price rises in remarks on Monday.
The public debate among Fed officials about the path of the recovery signals that there is unlikely to be any change at the U.S. central bank's policy meeting next week in its plan to buy $600 billion of longer-term Treasuries through the end of June.
However, the differences point to a lively debate at that meeting about how and when to pull back some of the unprecedented stimulus monetary policymakers have provided the world's largest economy.
Economic growth may have been slower than expected in the first three months of the year, Atlanta Fed President Dennis Lockhart said, an indication that the central bank is not likely to rush to scale back its vast support for the economy.
It appears that the first quarter will come in soft relative to what we expected -- what many people expected -- at the beginning of the year, Lockhart said at a business event.
Lockhart is viewed as a centrist among Fed policy makers. Fed leadership has given no sign it is ready to cut short its policy easing or move to the exits any time soon.
The Fed slashed short-term interest rates to near zero in December 2008 and then bought $1.4 trillion in longer-term securities to pull the economy out of recession. It re-launched asset purchases last November as the recovery flagged.
Rising gas prices have weighed on consumers and businesses, Lockhart said. Because turmoil in the Middle East is likely to persist for a while, oil prices will probably remain elevated for some time, he added.
While the economy appears to be absorbing higher oil prices without severe negative effects, oil at $150 a barrel could plunge the economy into recession, Lockhart said.
The Fed's accommodative policy stance contrasts with other central banks around the world that have raised or are poised to raise benchmark rates in response to rising inflation. However, some at the Fed believe the recovery is gaining speed and that inflation is or could soon become a risk.
Some of those views were on display on Monday.
The Fed should not exclude food and energy from the inflation numbers it targets, and those figures have been rising recently, St. Louis Federal Reserve Bank President James Bullard said in Louisville, Kentucky.
Bullard has taken a hawkish tone recently, and has urged the Fed to cut short its bond buying by $100 billion, although he did not repeat that call on Monday.
He did say he is beginning to worry about recent inflation readings, bolstered by rising energy costs.
U.S. consumer prices rose 2.7 percent in the year to March, but the core measures, which exclude food and energy prices, climbed just 1.2 percent.
Bullard argued the underlying fundamentals for U.S. economic growth are strong despite signs that first quarter economic growth, now seen possibly coming in below 2 percent, looked much weaker than had been expected a few months ago.
U.S. gross domestic product rose 3.1 percent in the fourth quarter. Unemployment, meanwhile, remains at an elevated 8.8 percent, though it has come down rapidly in recent months.
Speaking at the same Atlanta forum as Lockhart, Dallas Fed President Richard Fisher said higher energy prices could have an inflationary impact, too.
We have inflationary forces working on us right now despite the fact that we have a vast surplus of unemployed Americans, he said.
Fisher, viewed as a policy hawk, is the only one of the three who is a voting member on the Fed's policy-setting panel this year.
(Additional reporting by Pedro Nicolaci da Costa in Louisville, Kentucky and Mark Felsenthal in Washington; Writing by Mark Felsenthal; Editing by Chizu Nomiyama)