Fed Minutes Show Growing Openness to Rate Hikes at March Meeting

• A growing group of Federal Reserve policymakers felt last month that interest rate hikes might be ​needed to counter inflation that continued to exceed the central bank's 2% target, particularly given the inflationary impact of the U.S.-Israeli war with Iran, according ‌to the minutes of their March 17-18 meeting.
• "Some participants judged that there was a strong case for a two-sided description of the (Federal Open Market) Committee's future interest rate decisions in the post-meeting statement, reflecting the possibility that upwards adjustments to the target range for the federal funds rate could be appropriate if inflation were to remain at above-target levels," the minutes said, referring to support for language in ​the Fed's policy statement that would suggest the Fed might either cut or raise rates in the future.
• The Fed has been cutting rates since 2024, and ​its statement was designed to lean towards more reductions in the future, language that was ultimately maintained at the March meeting. Still, the March ⁠minutes reflect a larger group open to potential hikes than at the January meeting, when only "several" officials were willing to open the door to tighter monetary policy.
• Following the Feb. ​28 outbreak of war, "many participants pointed to the risk of inflation remaining elevated for longer than expected amid a persistent increase in oil prices," while others cited concerns about rising ​inflation expectations and risks that higher headline inflation would raise underlying inflation trends as well. Should the higher energy prices persist, "higher input costs would be more likely to pass through to core inflation," the minutes said.
• The Fed ⁠in March held its benchmark overnight interest rate steady in the 50%-3.75% rangeas it weighed how Middle East-driven oil spikes and AI adoption might fuel "persistent" inflation while simultaneously threatening economic growth and employment. The minutes were released on Wednesday, a day after the U.S. and Iran agreed to a two-week ceasefire. News of the cease fire caused oil pricesto drop more than 15% to around $92 a barrel.

(Source: Reuters)