The Federal Reserve Open Market Committee (FOMC) held the federal funds rate at a target range of 3.50% to 3.75% in April.
The minutes showed that the committee remains concerned about inflation staying above the 2% target. Participants highlighted that recent inflation readings remained elevated, with the risks to the outlook tilted to the upside. The conflict in the Middle East was again cited as a key driver, with “almost all participants” noting the risk that higher energy and input costs could persist and delay the return of inflation to target. The “vast majority” judged that inflation could take longer than previously expected to reach 2%, reflecting a combination of geopolitical risks, tariffs, and potential pass-through to broader prices.
With respect to the labor market, participants still judged it to be roughly balanced and expected it to remain stable in the near term. While the baseline expectation is for the unemployment rate to remain broadly steady, several participants pointed to downside risks to hiring, particularly in the context of slowing job gains and uncertainty around business investment decisions. At the same time, discussion also highlighted structural forces — including AI-related investment — that could both raise costs in the near term and improve productivity over time.
Importantly, “many participants indicated that they would have preferred removing the language from the postmeeting statement that suggested an easing bias”. These minutes reveal a clear shift toward a more two-sided or hawkish stance for the Fed, one where participants disagree on the appropriate stance of policy to a wider extent than has been the case recently. Indeed, this meeting had an unusually high number of dissents compared to recent history.
The committee viewed uncertainty around the outlook as elevated considering the conflict in the Middle East and the potential consequences of AI adoption, and risks to the forecasts for GDP and employment as tilted to the downside.
Key Implications
The minutes underscore a notable rise in internal disagreement signaling a committee that is less aligned around imminent cuts and increasingly focused on preserving optionality in both directions.
The evolution of the Middle East conflict remains central. Even if energy prices stabilize, the minutes suggest concern that second-round effects (via wages, expectations, and broader input costs) could prolong the inflation shock. The committee’s reaction function is now more explicitly two-sided, reducing confidence in near-term easing. The bar for cuts has moved higher, and the Fed appears prepared to wait longer — or potentially tighten policy — if inflation does not convincingly return toward target.
 held the federal funds rate at a target range of 3.50% to 3.75% in April.){kind=link}