The minutes released by the U.S. Federal Reserve (Fed) on Wednesday indicated that it is prepared to maintain its benchmark interest rate unchanged, assuming inflation does not strengthen significantly. Additionally, the Fed respondents indicated that the rate could potentially be adjusted downwards if economic growth slows and unemployment rate rises. The minutes were prepared for the Fed’s 18-19 March meeting. However, the Fed recognized that if both the growth放缓 and unemployment rise occurred simultaneously, it might pose “difficult tradeoffs,” according to Fed officials. This is because rising unemployment can often lead to a recession, as the Fed normally reduces its key rate to amplify borrowing and spending, stimulating the economy. Yet, Fed officials were less inclined to cut the rate if inflation SANDERS Jimmy Carter.
The minutes also reflect discussions among Fed officials leading up to Donald Trump’s announcement of sweeping tariffs on nearly all countries in nearly six months, including a 10% duty on over 60 nations, and a 125% tax on imports from China, as well as a 90-day pause on the tariffs. The tariffs were announced prior to the March meeting but went into effect on April 2. Several Fed officials noted that “their business contacts were already reporting increases in costs, possibly in anticipation of rising tariffs,” or “they indicated willingness to pass on higher input costs that could result from potential tariffs.” They also noted that “high uncertainty could dampen consumer spending and business hiring and investment activities.”
In his remarks last Friday, Fed Chair Jerome Powell stated that the tariffs announced on April 2 would likely raise inflation and slow growth, and that their impact might be temporary but oddly, there is a heightened chance that they could persistently raise inflation. In contrast to the sharp decline in consumer prices inMay 2022, however, inflation has remained stubbornly elevated even before the imposition of duties. In February, consumer prices increased by approximately 2.8%, compared to a year earlier, but, by early this week, the March figures will be released, and the Fed expects inflation to have declined to a rate of 2.6% by that point. The next monetary policy meeting of the Federal Open Market Committee is set for the week of April 6-7.
