Fed Minutes Show Broad Sense US Risks Tilted Towards Higher Inflation, Slower Growth

• U.S. Federal Reserve policymakers were nearly unanimous at their meeting last month that the U.S. economy faced risks of simultaneously higher inflation and slower growth, with some policymakers noting that "difficult tradeoffs" could lie ahead for the central bank, according to the minutes of the meeting.
• The March 18-19 session was held in the wake of initial Trump administration tariff plans that raised uncertainty about the economic outlook and led participants to favour a "cautious approach" that could opt to keep interest rates higher for longer if inflation were to persist or cut rates if a weakening economy needed more immediate attention.
• "Participants assessed that uncertainty around the economic outlook had increased, with almost all participants viewing risks to inflation as tilted to the upside and risks to employment as tilted to the downside," according to the minutes, which were released on Wednesday.
• Some at the meeting "observed that the (Federal Open Market) Committee may face difficult tradeoffs if inflation proved to be more persistent while the outlook for growth and employment weakened."
• Even from the more limited vantage point of March, Fed officials cut their forecasts for economic growth to 1.7% and from 2.1%, raised their inflation outlook for 2025 to 2.7% from 2.5%, and trimmed the number of projected quarter-percentage-point rate cuts for this year from three to two.
• As at mid-March, before the rout in stock prices that followed Trump's more recent tariff announcements, Fed officials were already concerned about the risks of "an abrupt repricing."

(Source: Reuters)