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Investing.com -- Federal Reserve policymakers remained cautious on future rate cuts, weighing growing concerns about tariffs likely boosting inflation while simultaneously hurting economic growth, according to the minutes of the Mar. 21-22 meeting released on Wednesday.
"The risks around the baseline projection for inflation were still seen as skewed to the upside because core inflation had not come down as much as expected last year and because changes to trade policy could put more upward pressure on inflation than the staff had assumed,"
Against the backdrop of upside risk to inflation and ongoing economic uncertainty," participants remarked that uncertainty about the net effect of an array of government policies on the economic outlook was high, making it appropriate to take a cautious approach," the minutes showed.
The FOMC maintained its benchmark rate in a range of 5.25% to 5.5% at the March meeting, while maintaining their outlook for two rate cuts this year.
Adding to the complexity, President Trump announced a 90-day pause on reciprocal tariffs on Wednesday on countries who hadn't retaliated against the reciprocal tariffs that went into affect overnight. China, however, faces a steeper 125% tariff, up from 104% for retaliating to the U.S. tariffs that were imposed overnight.
The release of the March minutes comes amid mixed economic data and evolving views among Fed officials. The March nonfarm payrolls report released last week showed stronger-than-expected job gains.
Several Fed officials have offered their takes on the outlook in recent weeks. Atlanta Fed President Raphael Bostic said last week that he still expects the Fed to cut rates once this year, revising his prior forecast from two cuts.
More recently, Chicago Fed President Austan Goolsbee expressed concerns about the potential impact of tariffs on inflation, noting that trade policy could add to the inflationary pressures in the economy.
“The anxiety is if these tariffs are as big as what are threatened on the US side, and if there’s massive retaliation, and then if there’s counter retaliation again, it might send us back to the kind of conditions that we saw in ‘21 and ‘22, when inflation’s raging out of control,” Goolsbee said Monday during an interview on CNN.