The Federal Reserve's consensus about when to shrink its balance sheet and how to approach policy strategy in a time of low inflation is starting to fragment.

Fed officials continued to view gradual interest-rate increases as appropriate while starting the process of unwinding the central bank's $4.5 trillion balance sheet this year, minutes from their June 13-14 meeting released on Wednesday showed. But their debate highlighted divisions over the timing of the roll-off and unease at recent weak readings on inflation.

“They don't understand why inflation is so low while they are nearing full employment,” said Julia Coronado, president of MacroPolicy Perspectives in New York.