PANews reported on April 9th that, according to Jinshi, Federal Reserve officials weighed different scenarios facing the US economy following the outbreak of the war with Iran, including scenarios requiring interest rate cuts and scenarios potentially requiring rate hikes. The minutes of the March FOMC meeting released Wednesday showed that most officials were concerned that the war could impact the labor market, thus necessitating lower interest rates. At the same time, many officials also emphasized the risks of inflation, which could ultimately require a rate hike. The minutes showed that an increasing number of officials recommended including relevant statements in the post-meeting statement mentioning the possibility of a rate hike under certain conditions. The minutes stated: “Some participants believed that there were sufficient reasons to include a two-way description of future interest rate decisions in the post-meeting statement to reflect that raising the target range for the interest rate might be appropriate if inflation persists above the target level.” After the March meeting, several Fed policymakers indicated their preference to keep interest rates unchanged while assessing the impact of the war. Overall, policymakers’ response to the war reflects their concern about the risks of both sides of their dual mandate. The minutes stated, “The vast majority of participants believed that both upside risks to inflation and downside risks to employment remained at high levels, and most participants noted that these risks had increased as the situation in the Middle East developed.” At the March meeting, Federal Reserve officials maintained the benchmark policy rate in the range of 3.5% to 3.75%.
The minutes of the Federal Reserve’s March meeting revealed an increase in the number of officials who wanted to signal to the market that the next step might be a rate hike rather than further rate cuts. The minutes stated, “Some participants believed there were sufficient grounds to provide a two-way description of the Committee’s future interest rate decisions in the post-meeting statement.” In contrast, the January meeting minutes only mentioned “a few” participants holding this view. In the Fed’s terminology, “some” refers to more people than “several.”
