Inflation remained a major concern for U.S. Federal Reserve monetary policy makers at their last meeting.

Minutes of the Federal Open Market Committee’s November 1 meeting, released today, show Fed policy makers were still concerned about high costs for energy products despite a partial fallback in gasoline prices.

“While participants noted some recent favorable data on core inflation and labor costs, upside risks to the outlook for underlying inflation remained a key concern,” according to the minutes.

Fed policy makers noted that “core inflation continued to be subdued,” but surveys of businesses and households suggested high energy prices were taking their toll on broader inflation, the FOMC said. “There was a risk that the large cumulative rise in energy and petroleum product prices through the summer would be transmitted to core consumer prices,” it said.

“On balance, meeting participants remained concerned about heightened inflation pressures,” the minutes said.

The FOMC said surveys of near-term inflation expectations had risen notably, though longer-term inflation expectations, as reflected in Treasury yields, remained contained.

“It was noted, however, that longer-term expectations of inflation remained contained in the context of an increase in the extent of additional monetary policy tightening expected in financial markets,” it said.

The Fed raised the federal-funds rate, its key short-term interest rate target, to 4% at the last FOMC meeting.. Financial markets widely anticipate the Fed will raise the rate to 4.25% at its next meeting on Dec. 13, and many market observers expect the central bank to raise the rate further to 4.5% by mid-2006.

The FOMC minutes show policy makers thought the U.S. economy was continuing to grow at “a solid pace” despite damage from Hurricanes Katrina and Rita, and that economic growth in the near term “was likely to be boosted by additional fiscal stimulus, in part to support recovery and rebuilding from the hurricanes.”