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Fed Meeting Minutes: Policymakers Focus on Dual Risks of Iran War
Svmuu News: Following the outbreak of the Iran war, Federal Reserve officials weighed different scenarios facing the U.S. economy, including those that might necessitate interest rate cuts and those that could require rate hikes. The minutes from the March FOMC meeting, released on Wednesday, showed that most officials were concerned the war could impact the labor market, potentially warranting lower interest rates. At the same time, many officials also emphasized inflation risks, which might ultimately require raising rates to address. The minutes indicated that a growing number of officials suggested including language in the post-meeting statement mentioning the possibility of rate hikes under certain conditions. The minutes stated: "Some participants judged that there was a strong case for including language in the post-meeting statement that described future policy decisions as two-sided to reflect that, in the event that inflation were to persist above the Committee's objective, it would likely be appropriate to raise the target range for the federal funds rate." Since the March meeting, several Fed policymakers have indicated a preference to keep interest rates unchanged while assessing the war's impact. Overall, policymakers' response to the war reflects their focus on risks to both sides of their dual mandate. The minutes said: "A substantial majority of participants viewed the risks to inflation as tilted to the upside and the risks to employment as tilted to the downside, with most noting that these risks had risen somewhat as the situation in the Middle East evolved." At the March meeting, Fed officials kept the benchmark policy rate in the range of 3.5% to 3.75%. (Jin10)
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