Fed Meeting Minutes: Policymakers Focus on Dual Risks of Iran War

Odaily News: Following the outbreak of the Iran war, Federal Reserve officials weighed different scenarios for the U.S. economy, including situations that might necessitate interest rate cuts as well as those that could require rate hikes. The minutes from the March FOMC meeting released on Wednesday showed that most officials were concerned the war could impact the labor market, potentially warranting lower interest rates. Simultaneously, many officials also emphasized inflation risks, which might ultimately require raising rates to address. The minutes indicated that a growing number of officials suggested adding language to the post-meeting statement mentioning the possibility of rate hikes under certain conditions. The minutes stated: "Some participants saw a strong case for including language in the post-meeting statement that described future policy decisions as two-sided, to reflect that raising the target range for the federal funds rate could be appropriate if inflation were to persist above the Committee's objective." After the March meeting, several Fed policymakers have expressed a preference to keep interest rates unchanged while assessing the war's impact. Overall, policymakers' response to the war reflects concerns about risks to both sides of their dual mandate. The minutes said: "A substantial majority of participants judged that the risks to inflation were tilted to the upside and the risks to employment were tilted to the downside, with many noting that these risks had increased with developments in the Middle East." At the March meeting, Fed officials kept the benchmark policy rate in the range of 3.5% to 3.75%. (Jin10)