Interest rates,Gold and Cuts-It's all happening at the Fed

Federal Reserve officials started to debate raising interest rates in January, with some arguing they might need to move sooner than expected, minutes of the meeting revealed on Wednesday.

The Fed has kept interest rates at close to zero since the end of the financial crisis in 2008

. According to minutes of the 28-29 January meeting, released after the customary three-week lag: “A few participants raised the possibility that it might be appropriate to increase the federal funds rate relatively soon.”

The officials were concerned about inflation but others argued inflation was too low.

Any rise is unlikely in the short term. Most Fed officials continued to believe it would not be appropriate to raise short-term rates until 2015 or later, according to economic projections officials submitted at their December meeting. They also argued that standard policy tools did not apply, as the US economy continues to feel the impact of the recession.

The Fed had previously suggested any rise in interest rates would be linked to the unemployment rate falling below 6.5%.

 Last month unemployment dipped to 6.6%, but problems remain in the jobs market. The percentage of people no longer seeking work is at 30-year highs.

 Long-term and youth unemployment are also high, as are the jobless rates for African Americans and hispanics.

The news came as the Fed appeared to largely shrug off disappointing monthly jobs reports from the Labor Department;  A report published after the Fed meeting showed continued weakness in January, with the US adding just 113,000 jobs for the month, well below recent monthly gains.

Still turning off the taps

December’s disappointing jobs figures did not deter the Fed’s decision to cut back on its quantitative easing (QE) economic stimulus programme. QE is currently pumping $65bn a month into the bond markets, in an attempt to keep down interest rates and encourage investment. The rate was cut by $10bn after January’s meeting.This has caused gold to drop by 1% this Wednesday.

"What the Fed is saying is the economy is strong enough for it to continue pulling back its bond purchases, and the equities may continue to rally, so there is not as much a need forprecious metals as a safe haven," said Tom Power a senior commodity broker RJO Futures.