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RPT-As Fed nears rate hikes, policymakers plan for 'brave new world'

(Repeats item originally published on Aug 27 with no change to text)

By Jason Lange and Ann Saphir

Aug 27 Federal Reserve policymakers are signaling they could raise U.S. interest rates soon but they are already weighing new tools they may need to fight the next recession.

A solid U.S. labor market "has strengthened" the case for the first rate increase since last December, Fed Chair Janet Yellen told a central banking conference in Jackson Hole, Wyoming. Several of her colleagues said the increase could come as soon as next month if the economy does well.

Further rate hikes are expected to be few and far between as the U.S. central bank tries to balance a desire to fuel growth against worries it could overheat the economy.

But Fed officials at three-day conference that ended Saturday also said they need to consider new policy tools for use down the road, such as raising the inflation target or even Fed purchases of non-government-backed assets like corporate debt.

Such ideas would test the limits of political feasibility and some would need congressional approval. The view within the Fed is that it could take effort to win over a public already skeptical of the unconventional policies the Fed undertook during the last crisis.

Policymakers think new tools might...


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