Fed pressed ahead with plan to raise rates as it debated guidance

By Howard Schneider and Michael Flaherty

WASHINGTON (Reuters) - The U.S. Federal Reserve pressed ahead at its last policy-setting meeting with plans to begin raising interest rates later this year despite an apparently vigorous debate over how to communicate its intentions.

According to minutes of the Fed's December meeting, released on Wednesday, U.S. central bankers reviewed a broad set of data showing that the economic recovery in the United States was holding its own in a world that was turning in the wrong direction - with recession threatening in Japan and Europe and a slowdown in major emerging markets.

Plummeting oil prices were pushing the United States further from the Fed's inflation target, but consumers appeared poised to spend, jobs were being created, and business investment seemed steady.

"Many participants pointed to relatively high levels of consumer confidence as signaling near-term strength in discretionary consumer spending, and most participants judged that the recent significant decline in energy prices would provide a boost," the minutes said.

"Industry contacts pointed to generally solid business conditions, with businesses in many parts of the country expressing some optimism about prospects for further improvement in 2015. Manufacturing activity was strong."

But with inflation still low, and the economic outlook for the euro zone and Japan darkening, the Fed struggled for how best to square the circle - acknowledging improvement in the United States while not committing to any particular timetable for raising rates.

(Reporting by Howard Schneider; Editing by Paul Simao)