Yesterday, the Federal Reserve released the minutes from its late-April meeting, and as we suspected, the central bank is leaning towards a pause in interest rates. The New York Times reports:

The minutes revealed deep divisions among the bankers, who acknowledged the "difficulty of gauging the appropriate stance of policy in current circumstances."

Those circumstances referred to the dual demons facing the Fed: the broad economic downturn that has depressed spending habits and hurt the job market, and the high costs of oil and food, which have escalated the threat of inflation.

Central bankers projected that prices would rise in 2008 at an annual rate of 3.1 to 3.4 percent, far faster than the year before. At the same time, they predicted that the nation's rate of overall economic growth would significantly slow, to an anemic annual rate of 0.3 to 1.2 percent.

The bankers agreed that inflation would probably taper off in the latter half of the year and fall back to moderate levels in 2009, as businesses found it more difficult to pass on prices to hurting consumers, the minutes said.

In deciding to cut rates at the April meeting, Fed officials noted that "the outlook for growth and employment remained weak." They also agreed that while the economy had not significantly weakened in April, the risk of turmoil in the financial markets remained a problem.

"An additional easing in policy would help to foster moderate growth over time," the minutes said, "without impeding a moderation in inflation."

In the minutes, Fed officials also noted that banks and mortgage lenders had tightened lending standards and "credit conditions were seen as remaining tight." They said that the housing slump appeared far from its nadir and that the problems in that market would continue to weigh on the overall economy.