Federal Reserve minutes show split on QE2

NEW YORK (CNNMoney.com) -- When Federal Reserve policymakers met behind closed doors earlier this month to discuss the controversial policy of quantitative easing, the debate was a contentious one.

Minutes from the Federal Open Market Committee's Nov. 3 meeting released Tuesday, offer a fresh behind-the-scenes look into the private debate that transpired before Fed officials made the unpopular decision to initiate a new stimulus plan.

While only one Fed member, Kansas City Fed President Thomas Hoenig, formally voted against the plan -- several members also raised concerns that the Fed's newly launched $600 billion in asset purchases could have negative effects on the struggling U.S. economy.

The plan is meant to stimulate the economy by keeping interest rates low, leading to more borrowing and spending by both businesses and consumers.

Since the program was announced at the last meeting, the Fed has been under constant fire from critics across the globe -- including world leaders, conservative economists and outspoken politicians like Sarah Palin -- who fear the action will devalue the dollar.

Opponents say the Fed's move could reignite inflation pressures, cause a new global asset bubble or spark a so-called "currency war" in which nations competitively devalue their own currencies to keep their own exports competitive.

The minutes show that at least some Fed members shared those fears.

"Some participants noted concerns that additional expansion of the Federal Reserve's balance sheet could put unwanted downward pressure on the dollar's value in foreign exchange markets," the minutes said.

Some Fed officials also expressed concern that the so-called QE2 plan would "cause an undesirably large increase in inflation."

Economists have criticized Fed officials for being too outspoken with their dissenting viewpoints, saying an appearance of a divided central bank could undermine the institution's credibility.

The internal debate echoes the same uncertainty prevailing in financial markets and holding back the economic recovery, said Adolfo Laurenti, deputy chief economist at Mesirow Financial.

"Markets hate uncertainty, economists hate uncertainty too," said Laurenti. "We would like to know we're on an upward trend or downward trend, and the fact is that very intelligent people can make a very legitimate case for either side of the debate."

And according to the Fed, weak growth is not likely to end soon. The minutes show the Fed lowered its outlook for the U.S. economy and members said they considered their progress in building full employment and stable prices "disappointingly slow."

More than half of the central bank's policymakers think it will take about five or six years for unemployment, growth and inflation to return to more normal levels.