If you needed further evidence of how tricky central-bank policy making has become, just take a look at the minutes of last month's Federal Reserve meeting.

The transcripts, released Wednesday afternoon, reveal the myriad competing considerations, interpretations and, therefore, judgments facing a central bank that, unlike its counterparts in Europe and Japan, is operating in a healing economy that generates higher growth and robust job creation.

Forward Guidance

Although the Fed recognizes the improvement of the domestic economy, the minutes show the central bank is in no rush to declare liftoff for economic growth. There are still many questions. Indeed, Fed officials can’t even agree to a bottom line on an issue as basic as the economic impact of the steep decline in oil prices.

Not long ago, the oil price collapse would have been viewed as unambiguously good news. These days, its implications are much harder to discern. Undoubtedly, lower fuel costs make consumers better off, providing the equivalent of an immediate large tax cut. But the drop is also devastating investment activity in the important domestic energy industry.

The competing considerations aren't limited to domestic considerations. The Fed is being forced to take a more global view in its assessment now that Europe and Japan are struggling, their balance of economic risk is shifting negative (for Europe, geopolitical uncertainty is also playing a role), and the dollar has appreciated markedly.

Conflicting considerations, both domestic and foreign, aren't limited to the economic domain. The Fed is also having to find an even more delicate balance between immediate financial stability and longer-term calm. It isn't easy to deliver both when the approach being used — artificially repressing financial volatility through the prolonged use of unconventional monetary policy — only buys short-term stability and heightens the risk of longer-term instability.

This is especially difficult when global growth is disappointing. This environment makes it more complicated to determine the when of the first rate increase, but it doesn’t change the how and why. 

Markets have interpreted the January minutes as implying a lower probability that the Fed will choose its June meeting to initiate its first interest rate-raising cycle in many years.

That makes sense, but I wouldn’t push that timetable much beyond June.

And when the Fed does start raising rates, probably sometime this summer in my opinion, it will do so in a very gradual process — one that these minutes confirm will probably be accompanied by lots of reassuring forward policy guidance language and will end well below historical averages for terminal interest rates.

To contact the author on this story: Mohamed El-Erian at melerian@bloomberg.net