By Kate Davidson

WASHINGTON-President-elect Donald Trump's name doesn't appear in the minutes from the Federal Reserve's December meeting. But a robust discussion about the potential economic impact from his election victory does.

Fed officials grappled with "considerable uncertainty" about the effect the incoming Trump administration could have on the economy when they met last month, according to minutes from the Fed's Dec. 13-14 policy meeting released Wednesday.

Almost all officials indicated that the prospects for fiscal stimulus-such as infrastructure spending or tax cuts-could boost economic growth in the coming years. Officials emphasized the timing, size and composition of Mr. Trump's proposals once he takes office are wild cards in deciding how to adjust interest rates.

Officials "agreed that it was too early to know what changes in these policies would be implemented and how such changes might alter the economic outlook," the minutes said. Many officials also worried the uncertainty "made it more challenging to communicate to the public about the likely path of the federal funds rate."

Fed officials voted unanimously last month to lift their benchmark federal funds rate by a quarter percentage point to a range between 0.50% and 0.75%. It was the first short-term rate increase since December 2015, when officials lifted rates from near zero, where they had remained since the financial crisis.

Depending on the mix of tax, spending and regulatory policy changes that lawmakers pursue, several officials said economic growth might turn out to be faster or slower than they anticipated in December. Many officials also emphasized the importance of monitoring risks to the forecast, including the possibility of further strengthening of the dollar, financial instability overseas and the fact rates are still close to zero.

Some officials warned the possibility for stronger economic growth and further increases in oil prices, as well as a rise in inflation compensation in recent months, could lead to higher inflation. But others noted that a stronger dollar could continue to keep inflation at bay.

The Fed's preferred inflation gauge, the personal consumption expenditures price index, was up 1.4% from a year earlier in November, matching October as the strongest year-over-year increase in two years. Prices have risen modestly since March amid stabilizing energy prices and firming consumer demand.

The minutes underscored remarks Fed Chairwoman Janet Yellen made at a press conference following the December meeting.

Ms. Yellen emphasized the "considerable uncertainty" about possible policy changes that the incoming administration and new Congress may support, their potential economic effects and what they will mean for monetary policy.

Those changes will have to be factored into the Fed's forecasts eventually. "We're operating under a cloud of uncertainty at the moment," she said.

Republicans will control the White House and Congress when Mr. Trump takes office on Jan. 20. The new Congress convened Tuesday.

Higher stock prices, rising longer-term interest rates and the strengthening dollar since the U.S. presidential election signal that Wall Street expects the Trump administration to usher in a new era of fiscal expansion through tax cuts and higher spending.

Most officials attributed the "substantial changes" in financial conditions between the November and December meetings to investor expectations of fiscal stimulus. But many Fed officials "expressed the need for caution" in evaluating the implications of market development for the economic outlook in light of the uncertainty about how the policies will unfold, and how global economic and financial conditions will evolve.

The decision to raise rates in December was "a reflection of the confidence we have in the progress the economy has made and our judgment that progress will continue," Ms. Yellen said following the December meeting.

Ms. Yellen said officials expect job conditions will continue to strengthen somewhat further, and said the Fed's updated economic forecasts project growth "a touch stronger" and unemployment "a shade lower" in the coming years.

Since Fed officials last met, the Commerce Department revised higher its estimates for third-quarter growth to a seasonally adjusted annual rate of 3.5%, the strongest pace in two years. Data also showed sales of new and existing homes continued to climb in November and the University of Michigan's consumer sentiment rose sharply to a 12-year high last month.

Economists surveyed by The Wall Street Journal estimate employers added 183,000 jobs in December and the unemployment rate ticked up to 4.7%. The Labor Department will release employment data on Friday.

Officials in the minutes also flagged the possibility that the jobless rate may fall below the rate where they see it settling in the long term, which may require them to raise rates faster than they currently expect "to limit the degree of undershooting and stem a potential buildup of inflationary pressure."

Central bank officials have debated in recent months how far they should let unemployment fall, with one side arguing they should continue to let it drop to bring more workers off the sidelines, and the other warning of runaway inflation if officials let it drop much further from the 4.6% it reached in November.

Fed officials saw three rate increases in 2017, according to a summary oftheir economic projections submitted in December, compared with just two increases when they met in September. But Ms. Yellen downplayed the steeper rate path as "a very modest adjustment," with only some policy makers changing their estimates.

Prior to the release of the December minutes, markets saw a 4% probability of a rate increase at the Fed's Jan. 31-Feb. 1 meeting, and 30% odds of an increase at the March meeting, according to CME Group.

Write to Kate Davidson at

(END) Dow Jones Newswires

January 04, 2017 14:15 ET (19:15 GMT)

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