The minutes of the US Federal Reserve (FED) meeting have been published. According to the minutes, the FED decided to significantly slow down the pace of reducing its balance sheet last month. However, some participants stated that there was “no convincing reason” for this decision.
Policymakers almost unanimously agreed that the U.S. economy faces risks of both rising inflation and slowing growth, according to the minutes, with some members noting that the Fed may face “tough choices.”
The meeting, held on March 18-19, came after the Trump administration’s first tariff plan. This has created uncertainty in the economic outlook and led participants to advocate for a more cautious approach. It was stated that if inflation becomes persistent, interest rates could be kept high for a long time, and if the economy weakens further, interest rate cuts could be on the agenda.
The Fed minutes showed that inflation has slowed significantly over the past two years but is still above the agency’s long-term target of 2%. Some participants noted that inflation figures for the first two months of the year were above expectations. The slowdown in housing inflation parallels a cooling in the rental market, while inflation in the non-housing services sector remains high. Price increases in non-market services in particular have drawn attention.
Some members, who noted that core goods inflation had increased, said that this could be linked to the impact of rising tariff expectations. The minutes also stated that inflation could increase this year due to the impact of higher tariffs, but there was great uncertainty about how long this effect would last.
As noted by Nick Timiraos, a Wall Street Journal columnist and “Fed spokesman,” Fed officials last month highlighted the risks of persistent tariff-related inflationary pressures when they decided to keep interest rates steady. “Most participants noted that inflationary impacts from a variety of factors could last longer than they expected,” the minutes said.
Policymakers believe that current interest rates are “well positioned” to combat potential risks. However, if the labor market weakens, interest rates could be cut; if inflation worsens, rates will be held steady. Some members noted that the Fed may have to “strike a difficult balance” if inflation persists and the growth and employment outlook weakens.
*This is not investment advice.
