Highlights
The minutes of the March 18-19 FOMC reflect conditions three weeks ago when the scope of changes in tariff policy was as yet unknown and its possible impact on the US economy was part of the elevated uncertainty facing Fed policymakers.
The staff economic outlook was for weaker real GDP growth than from the prior meeting, and inflation projections were a little higher for this year. The staff made no material changes to the placeholder assumptions for potential policies that were used for the previous baseline forecast and continued to note elevated uncertainty regarding the scope, timing, and potential economic effects of possible changes to trade, immigration, fiscal, and regulatory policies. The staff continued to highlight the difficulty of assessing the importance of such factors for the baseline projection and had prepared a number of alternative scenarios, the minutes said. Risks for the economic projections had tilted to the downside.
The FOMC's views on the economy noted, the available data pointed to an economy that continued to grow at a solid pace and labor market conditions that remained broadly balanced, but that inflation stayed somewhat elevated. Participants generally noted the high degree of uncertainty facing the economy.
Inflation was thought likely to be boosted this year by the effects of higher tariffs, although significant uncertainty surrounded the magnitude and persistence of such effects. Even three weeks ago, Several participants noted that the announced or planned tariff increases were larger and broader than many of their business contacts had expected. Several participants also noted that their contacts were already reporting increases in costs, possibly in anticipation of rising tariffs, or that their contacts had indicated willingness to pass on to consumers higher input costs that would arise from potential tariff increases. Labor market conditions were deemed unlikely to be a source of inflationary pressure.
Importantly, A couple of participants noted that, in the period ahead, it could be especially difficult to distinguish between relatively persistent changes in inflation and more temporary changes that might be associated with the introduction of tariffs.
Almost all participants pointed out that many market- or survey-based measures of near-term expected inflation had increased recently. Participants generally noted that most measures of longer term expected inflation remained well anchored, a factor likely to put downward pressure on inflation. Several participants emphasized that ensuring that longer-term inflation expectations remained anchored would enhance the Committee's ability to achieve its price-stability goal, the minutes said. Although in other settings Chair Jerome Powell said that survey data does not always reflect actual behavior, the FOMC appears to be watching to see if that is or is not the case in the current environment.
While the labor market remained broadly in balance, Several participants highlighted recent increases in businesses' layoff announcements and in people working part time for economic reasons. A majority of participants commented that the recent cuts in federal government jobs and to federal funding had begun to affect employment at federal contractors, universities, hospitals, municipalities, and nonprofit organizations, with many organizations that rely on government contracts having reported layoffs or pauses in their hiring plans. In addition, many participants noted that their contacts and business survey respondents reported pausing hiring decisions because of elevated policy uncertainty. Several participants relayed reports from contacts who were concerned that restrictive immigration policies would reduce labor supply and put upward pressure on wages in certain sectors. Data on the labor market releases since the meeting confirms this assessment.
The FOMC took into account that continued growth might be moderating with slower consumer spending and business uncertainty pause their capital spending plans.
The review of monetary policy strategy, tools, and communications that took place during the meeting. FOMC participants generally supported the current description of maximum employment in the statement on longer-run goals and monetary policy strategy as being not directly measurable and changing over time for reasons owing largely too nonmonetary factors. The minutes said monetary policy had been well-served by monitoring a wide range of indicators that can vary depending on labor market and economic conditions.
The minutes said that the dual mandate goals of maximum employment and price stability are not necessarily in conflict when both unemployment and inflation are low. When the situation is one where unemployment and inflation are higher than consistent with the dual mandate, the FOMC tries to determine which mandate requires the most effort to bring back into the Fed's goals. In the case of maximum employment, Participants also discussed the implications of pursuing a strategy that seeks to mitigate shortfalls of employment from its maximum level. Participants indicated that they thought it would be appropriate to reconsider the shortfalls language. The reconsideration is in the context of effective communications.
The staff economic outlook was for weaker real GDP growth than from the prior meeting, and inflation projections were a little higher for this year. The staff made no material changes to the placeholder assumptions for potential policies that were used for the previous baseline forecast and continued to note elevated uncertainty regarding the scope, timing, and potential economic effects of possible changes to trade, immigration, fiscal, and regulatory policies. The staff continued to highlight the difficulty of assessing the importance of such factors for the baseline projection and had prepared a number of alternative scenarios, the minutes said. Risks for the economic projections had tilted to the downside.
The FOMC's views on the economy noted, the available data pointed to an economy that continued to grow at a solid pace and labor market conditions that remained broadly balanced, but that inflation stayed somewhat elevated. Participants generally noted the high degree of uncertainty facing the economy.
Inflation was thought likely to be boosted this year by the effects of higher tariffs, although significant uncertainty surrounded the magnitude and persistence of such effects. Even three weeks ago, Several participants noted that the announced or planned tariff increases were larger and broader than many of their business contacts had expected. Several participants also noted that their contacts were already reporting increases in costs, possibly in anticipation of rising tariffs, or that their contacts had indicated willingness to pass on to consumers higher input costs that would arise from potential tariff increases. Labor market conditions were deemed unlikely to be a source of inflationary pressure.
Importantly, A couple of participants noted that, in the period ahead, it could be especially difficult to distinguish between relatively persistent changes in inflation and more temporary changes that might be associated with the introduction of tariffs.
Almost all participants pointed out that many market- or survey-based measures of near-term expected inflation had increased recently. Participants generally noted that most measures of longer term expected inflation remained well anchored, a factor likely to put downward pressure on inflation. Several participants emphasized that ensuring that longer-term inflation expectations remained anchored would enhance the Committee's ability to achieve its price-stability goal, the minutes said. Although in other settings Chair Jerome Powell said that survey data does not always reflect actual behavior, the FOMC appears to be watching to see if that is or is not the case in the current environment.
While the labor market remained broadly in balance, Several participants highlighted recent increases in businesses' layoff announcements and in people working part time for economic reasons. A majority of participants commented that the recent cuts in federal government jobs and to federal funding had begun to affect employment at federal contractors, universities, hospitals, municipalities, and nonprofit organizations, with many organizations that rely on government contracts having reported layoffs or pauses in their hiring plans. In addition, many participants noted that their contacts and business survey respondents reported pausing hiring decisions because of elevated policy uncertainty. Several participants relayed reports from contacts who were concerned that restrictive immigration policies would reduce labor supply and put upward pressure on wages in certain sectors. Data on the labor market releases since the meeting confirms this assessment.
The FOMC took into account that continued growth might be moderating with slower consumer spending and business uncertainty pause their capital spending plans.
The review of monetary policy strategy, tools, and communications that took place during the meeting. FOMC participants generally supported the current description of maximum employment in the statement on longer-run goals and monetary policy strategy as being not directly measurable and changing over time for reasons owing largely too nonmonetary factors. The minutes said monetary policy had been well-served by monitoring a wide range of indicators that can vary depending on labor market and economic conditions.
The minutes said that the dual mandate goals of maximum employment and price stability are not necessarily in conflict when both unemployment and inflation are low. When the situation is one where unemployment and inflation are higher than consistent with the dual mandate, the FOMC tries to determine which mandate requires the most effort to bring back into the Fed's goals. In the case of maximum employment, Participants also discussed the implications of pursuing a strategy that seeks to mitigate shortfalls of employment from its maximum level. Participants indicated that they thought it would be appropriate to reconsider the shortfalls language. The reconsideration is in the context of effective communications.
Definition
Detailing the issues of debate and consensus among policymakers, the Federal Open Market Committee issues minutes of its latest meeting three weeks after the meeting.
Description
The FOMC has changed dramatically in the transparency of its operations. It now discloses policy changes at the end of each meeting. Historically, the Fed used to keep investors guessing about policy changes and Fed officials did not appear on the speaking circuit as frequently as they do now.
The Fed's minutes are a market mover as investors and analysts parse each word looking for clues to policy. The minutes include the complete economic analysis compiled by Fed officials and opinions at odds with the consensus.
Investors who want a more detailed description of Fed opinions will generally read the minutes closely. Fed officials also make numerous speeches, which give their views to the public at large.
The Fed's minutes are a market mover as investors and analysts parse each word looking for clues to policy. The minutes include the complete economic analysis compiled by Fed officials and opinions at odds with the consensus.
Investors who want a more detailed description of Fed opinions will generally read the minutes closely. Fed officials also make numerous speeches, which give their views to the public at large.
