U.S. FOMC Meeting Minutes (March 18-19, 2025)

Fed minutes show committee struggling with policy uncertainty

• The Federal Open Market Committee (FOMC) held interest rates constant at the conclusion of its March 18-19 meeting. The minutes for this meeting, released today, unsurprisingly showed that increasingly negative sentiment in financial markets and uncertainty about future policies were taking a more prominent place in the committee's deliberations. 
• The minutes showed some confidence that inflation had made progress towards the committee's goal of price stability. Some participants observed that inflation data for January and February were higher than they had expected. Participants also judged that inflation was likely to increase this year due to the effects of tariffs. Almost all participants made note of rising inflation expectations across surveys and financial markets. 
• Similar to the minutes from the previous meeting, participants judged labour market conditions to be broadly in balance. This time, participants noted recent increases in business' layoff announcements and people working part time for economic reasons. Participants also commented on how "recent cuts in federal government jobs and federal funding had begun to affect employment at federal contractors, universities, hospitals, municipalities, and nonprofit organizations," acknowledging the impact of the administration's DOGE initiative.
• On the economic outlook, participants observed that the economy continued to grow at a solid pace, but "there were some indications that consumer spending growth might be moderating". Several participants noted recent downgrades in earnings forecasts from retailers and airline companies and highlighted that these could indicate weaker consumer demand. 
• The policy decision to maintain interest rates was unanimous. In discussing the outlook for monetary policy, it seemed policy uncertainty was paramount, as "participants remarked that uncertainty about the net effect of an array of government policies on the economic outlook was high". Participants "assessed that the Committee was well positioned to wait for more clarity" as it maintained still restrictive monetary policy against a backdrop of solid economic growth and labour market conditions.

Key Implications

• Much has transpired in the three weeks since the meeting described in these minutes, but one thing that has not changed is the heightened level of uncertainty around the timing and magnitude of changes in US trade policy.
• The clear statement that the committee feels it can be patient in assessing the evolution of the economy and its response to policy changes suggests the FOMC will not be in a hurry to provide support via lower interest rates despite recent events. In fact, the focus on inflation, rising inflation expectations, and the difficult tradeoffs that could results, as well as the explicit declaration of seeking clarity, all seem to indicate that the committee will not take returning to the rate-cutting path lightly.

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