Federal Reserve Meeting Minutes: Policymakers Concerned About Dual Risks of Iran War

According to Biju Network news, after the outbreak of the Iran war, Federal Reserve officials weighed different scenarios for the U.S. economy, including scenarios in which rate cuts would be needed and scenarios in which rate hikes might be necessary. The March FOMC meeting minutes released on Wednesday show that most officials are concerned the war could disrupt the labor market, which would require lowering interest rates. At the same time, many officials also emphasized inflation risks, which may ultimately require rate hikes in response. The minutes show that an increasing number of officials have suggested adding related wording to the post-meeting statement to mention the possibility of rate hikes under certain conditions. The minutes said: “Some participants believed there was sufficient reason for the post-meeting statement to describe future interest-rate decisions in a two-way manner, to reflect that, if inflation continued to run above the target level, it might be appropriate to increase the target range for the policy rate.” After the March meeting, several Fed policymakers have already said they are inclined to keep interest rates unchanged while assessing the impact of the war. Overall, policymakers’ response to the war reflects concern about risks on both sides of its dual mandate. The minutes said: “An overwhelming majority of participants believed that both the upside risks to inflation and the downside risks to employment were at elevated levels; most participants noted that these risks have risen as the situation in the Middle East has developed.” At the March meeting, Federal Reserve officials kept the benchmark policy rate in the range of 3.5% to 3.75%.