Federal Reserve officials saw the need for further gradual increases in U.S. interest rates at their meeting in January, signaling that the economy is strengthening, with unemployment at low levels and inflation rising. 

"Members agreed that the strengthening in the near-term economic outlook increased the likelihood that a gradual upward trajectory of the federal funds rate would be appropriate," the minutes read. 

The committee's careful use of the term "gradual" could strengthen investor convictions that the Fed will raise rates slowly toward more normal levels after cutting them to near zero in the aftermath of the 2008 financial crisis. Recent reports showing faster wage gains had kindled concerns among some traders that the Fed might accelerate the pace of increases.

The Fed raised rates three times in 2017, bringing the target to a range of 1.25% to 1.5%, from near zero before the central bank starting the current hiking cycle in late 2015. The committee held rates steady at the January meeting. In hiking cycles of past eras, the Fed sometimes raised rates at all or nearly all of its eight meetings per year.

"The takeaway from the meeting minutes is that it doesn't look like the Fed is ready to increase the pace of tightening at this point," said Charlie Ripley, senior investment strategist for Allianz Investment Management. 

A rate increase at the March meeting is deemed by most traders as a near certainty, he said. 

Most members of the Fed committee judged that the economy's strength would help push up inflation toward a 2% target "over the medium term." 

At the time of the meeting, the committee's preferred measure of inflation showed a 1.5% in prices for core goods excluding volatile items like food and energy. 

But a recent report showing an uptick in wages sent jitters through U.S. markets, as traders saw it as a sign of accelerating inflation.

While high inflation is considered bad for the economy, the Fed has been troubled by persistently low inflation in recent years. When inflation is low, it's usually seen as a sign of a sluggish economy. 

"Participants anticipated that inflation would continue to gradually rise as resource utilization tightened further and as wage pressures became more apparent; several expected that declines in the foreign exchange value of the dollar in recent months would also likely help return inflation to 2 percent over the medium term," according to the minutes. 

The recently enacted tax cuts appear to have boosted investor sentiment, Fed economists told committee members. 

"The staff continued to assume that the recently enacted tax cuts would boost real GDP growth moderately over the medium term," according to the minutes. 

However, a few participants said the tax cuts might lead companies to "cut prices in order to remain competitive or to gain market share, which could result in a transitory drag on inflation."

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