Federal Reserve policymakers were nearly unanimous at their meeting last month that the US economy faced risks of simultaneously higher inflation and slower growth, with some policymakers noting that “difficult tradeoffs” could lie ahead for the central bank, according to the minutes of the meeting.
The March 18-19 session was held in the wake of initial Trump administration tariff plans that had raised uncertainty about the economic outlook and led participants to favor a “cautious approach” that could opt to keep interest rates higher for longer if inflation were to persist, or cut rates if a weakening economy needed more immediate attention.
“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,” according to the minutes, which were released on Wednesday.
Some at the meeting “observed … that the (Federal Open Market) Committee may face difficult tradeoffs if inflation proved to be more persistent while the outlook for growth and employment weakened, the minutes said of the mood among the Fed’s 19 policymakers at a gathering held before President Trump on April 2 unveiled an even more aggressive and broadly applied set of import taxes than what had been announced before the March meeting.
Even from that more limited vantage point, Fed officials at that meeting cut their forecasts for economic growth, raised their inflation outlook for 2025, and trimmed the number of projected quarter-percentage-point rate cuts for this year from three to two.
Just as significantly, Fed officials pointed to increasing uncertainty around Trump’s policy plans and their potential impact on the economy.
As of mid-March, before the rout in stock prices that followed Trump’s more recent tariff announcements, Fed officials already were concerned about the risks of “an abrupt repricing.”
“A few participants cautioned that an abrupt repricing of risk in financial markets could exacerbate the effects of any negative shock to the economy,” the minutes said.
The measures Trump has announced since the Fed’s last meeting went further than anticipated, with US central bank officials including Fed Chair Jerome Powell saying the fallout is likely also to be greater.
In a post on his social media site early Wednesday afternoon, Trump said he was pausing many of the new levies for 90 days, although not the ones on imports from China.
Global equity markets had dropped sharply prior to Trump’s latest announcement and yields on US Treasury bonds had risen.
