FOMC minutes from the March 21-22 meeting revealed that committee members acknowledged inflation remaining significantly above the 2% target and a tight labor market, suggesting that “additional policy firming may be appropriate.” Some participants even considered a 50 basis point increase in the target range, but due to potential banking-sector developments impacting financial conditions and economic activity, they opted for a smaller increment.
The minutes note that several participants contemplated keeping the target range steady to allow more time to assess the economic effects of recent banking-sector developments and the cumulative tightening of monetary policy. However, due to Fed’s actions in coordination with other government agencies, which helped stabilize the banking sector, they deemed a 25 basis point increase appropriate in order to address elevated inflation and stay committed to the 2% longer-run goal.
The Committee agreed to consider recent banking developments in future monetary policy decisions, focusing on how they may affect employment, inflation, and the risks surrounding the outlook.
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