United States Federal Reserve policymakers expressed mounting concern over the twin risks of elevated inflation and slowing economic growth, amid heightened economic uncertainty, according to minutes from the central bank’s March 18–19 policy meeting released on Wednesday (Thursday AEST).
The minutes showed that nearly all participants saw the economic outlook as more uncertain, particularly in light of new United States tariffs that could fuel consumer price pressures. "Participants assessed that uncertainty around the economic outlook had increased, with almost all participants viewing risks to inflation as tilted to the upside and risks to employment as tilted to the downside," the record stated.
Some policymakers warned that the Federal Open Market Committee (FOMC) may face “difficult tradeoffs” if inflation persists while growth and employment soften.
Several officials flagged early evidence of inflationary pressures from tariffs: "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."
The March meeting took place amid heightened market volatility following the Trump administration's tariff proposals, which cast a cloud over the economic outlook.
Last month, the FOMC opted to maintain its benchmark interest rate at 4.25%–4.50%, with full agreement among voting members. The minutes noted that participants leaned towards a “cautious approach” to monetary policy, keeping rates elevated if inflation persists, but remaining prepared to cut if economic conditions deteriorate.
There was also division among officials regarding the pace of quantitative tightening (QT), the Fed’s process of reducing its balance sheet.
The central bank announced it would scale back the runoff of its Treasury holdings, lowering the cap from US$25 billion to $5 billion per month beginning in April, while keeping the cap for mortgage-backed securities unchanged at $35 billion.
This adjustment followed a presentation by a New York Fed official, who noted that "either pausing or sufficiently slowing runoff would provide meaningful insurance" against a potential reserve shortage.
However, the decision was not unanimous. Fed Governor Christopher Waller opposed the QT slowdown, continuing his scepticism toward using the balance sheet as a policy instrument and arguing for maintaining the pace of the runoff.
