By Harriet Torry

WASHINGTON--Federal Reserve officials said an interest-rate increase was possible "relatively soon" if incoming data continued to show an improving economy, with some explicitly calling for a move in December.

Some Fed officials argued that "an increase should occur at the next meeting," according to minutes of their Nov. 1-2 meeting, released Wednesday following the usual three-week lag. That indicated the Fed was leaning towards raising rates at its Dec. 13-14 gathering barring an upset to the economy.

"Most participants expressed a view that it could well become appropriate to raise the target range for the federal funds rate relatively soon," they said.

Still, Fed officials remain split. One camp wanted to hold off on raising rates until it saw more progress on inflation and employment, while another was ready to move in early November.

The economic backdrop has changed vastly since ?that meeting?. It took place before Donald Trump ?won the U.S. presidential election on Nov. 8, an outcome that has been felt in financial markets.

Market expectations of a December rate increase have soared since then due to a stream of healthy economic data and expectations the president-elect will enact fiscal stimulus once in office. Ahead of the minutes' release Wednesday, federal-fund futures -used by investors and traders to place bets on central-bank policy- showed that they see a 98.2% likelihood of a rate increase at the Fed's December policy meeting, according to data from CME Group.

When Federal Reserve officials met a week before the U.S. election, they demurred on increasing borrowing costs due to the relatively limited amount of information available since the September meeting, preferring to wait for more data on inflation and employment.

"Members generally agreed that the case for an increase in the policy rate had continued to strengthen. But a majority of members judged that the Committee should, for the time being, await some further evidence of progress toward its objectives," the minutes said.

While officials generally agreed labor market conditions had continued to improve over the intermeeting period, they were more divided over inflation, according to the minutes.

Although officials regarded higher-than-expected inflation readings in recent months as a positive development, a few argued that the uptick could be down to transitory factors, while "a couple of others" said inflation could move up to the Fed's 2% target more rapidly than previously expected.

The Fed raised its benchmark federal-funds interest rate from near zero to a 0.25% to 0.50% rangelast December, and began the year expecting to nudge rates up four more times in quarter-percentage-point increments in 2016. It hasn't moved because of recurrent worries about growth, hiring and turbulence overseas.

Policy makers' assessment of the employment situation was upbeat, they agreed that labor market conditions had improved further since the September meeting. However some argued in favor of letting the unemployment rate fall below its normal long-run level to push up inflation.

Taken all together, the minutes largely reinforced market and analyst expectations of a Fed move in December. An overwhelming 96.5% of economists polled in a recent Wall Street Journal survey, conducted after the U.S. election, expected the Fed to move borrowing costs higher at its Dec. 13-14 meeting.

Inflation has run below the Fed's 2% target for more than four years, however the minutes noted that inflation had increased in recent months. The personal-consumption expenditures price index, the Federal Reserve's preferred inflation measure, rose 1.2% in September from a year earlier - the firmest year-over-year reading since November 2014, but still below target.

Federal Reserve Chairwoman Janet Yellen largely echoed the minutes' depiction of an improving economy when she spoke at Congress's Joint Economic Committee last week, and told lawmakers that an increase in interest rates could come "relatively soon."

"At this stage, I do think that the economy is making very good progress toward our goals," she said. Other Fed officials, like Dallas Fed President Robert Kaplan, have said in recent days that the central bank should start removing accommodation.

Economic data has been strong since the last Fed gathering. Government reports on employment, retail sales and the housing market have broadly depicted an economy gaining strength. Earlier Wednesday, the Commerce Department reportedthat orders for durable goods posted their biggest jump in a year in October, and U.S. consumer sentiment surged in November, signaling rising confidence in the economy as the presidential campaign ended.

The minutes made no direct reference to the election, but "a few participants reported that uncertainty about prospects for government policy, shorter investment time horizons for businesses, or the potential for advances in technology to disrupt existing business models were likely weighing on capital spending plans."

Mr. Trump's win sent stocks, bond yields and the U.S. dollar higher, and shifted the outlook for fiscal, trade and regulatory policies considerably since the Fed's last policy meeting.

For the Fed, the tax cuts and fiscal spending Mr. Trump has proposed could send inflation higher, potentially prompting a more aggressive path of interest-rate increases.

Ms. Yellen said during testimony to Congress last week that "there's a great deal of uncertainty" surrounding the Trump administration's plans for fiscal policy.

"Given my current assessment, we will be watching the decisions that Congress makes and updating our economic outlook as the policy landscape becomes clearer and taking into account... the shifts in the economic outlook for the appropriate stance of policy," she said.

Write to Harriet Torry at harriet.torry@wsj.com

(END) Dow Jones Newswires

November 23, 2016 14:15 ET (19:15 GMT)

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