Federal Reserve meeting minutes: Policymakers focus on the dual risks of war with Iran

Following the outbreak of war with Iran, Federal Reserve officials weighed different scenarios facing the U.S. economy, including those requiring interest rate cuts and those 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, 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 indicated that a growing number of officials recommended including wording in the post-meeting statement that mentioned the possibility of a rate hike under certain conditions. The minutes stated: "Some participants believed that there were good 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." Following the March meeting, several Fed policymakers have indicated a preference for keeping interest rates unchanged while assessing the impact of the war. Overall, policymakers' response to the war reflects their concern about the risks associated with their dual mandate. The minutes stated, "The vast majority of participants believed that both upside risks to inflation and downside risks to employment remained high, and most participants noted that these risks had increased with developments in the Middle East." At the March meeting, Federal Reserve officials maintained the benchmark policy rate in the range of 3.5% to 3.75%. (Jinshi)