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FOMC minutes reveal larger rate hike considered, banking developments held back aggressive action

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.

Full FOMC minutes here.

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