The Federal Reserve held interest rates steady at its meeting in January. The minutes from that meeting, released on Wednesday, revealed most Fed officials supported holding policy at restrictive levels.
“Many participants noted that the Committee could hold the policy rate at a restrictive level if the economy remained strong and inflation remained elevated, while several remarked that policy could be eased if labor market conditions deteriorated, economic activity faltered, or inflation returned to 2 percent more quickly than anticipated,” the minutes read.
Participants observed the committee was “well positioned” to take time to assess the “evolving outlook for economic activity” and that further progress on inflation was needed before adjusting rates.
On the inflation front, “participants generally pointed to upside risks to the inflation outlook. In particular, participants cited the possible effects of potential changes in trade and immigration policy, the potential for geopolitical developments to disrupt supply chains, or stronger-than-expected household spending.”
Last week, Trump announced global 25% tariffs on steel and aluminum imports, to take effect on March 12. He later ordered that federal agencies study reciprocal tariffs on trading partners.
More recently, Trump said to expect additional duties on autos, chips, and pharmaceuticals. A flat tariff “in the neighborhood of 25%” would apply to all foreign automakers and start as soon as April 2.
Tariffs of 25% on Mexico and Canada are set to come next month, while 10% duties on China have already been implemented.
Along with policy uncertainties, the minutes also highlighted recent economic unknowns, including “the values of the longer-run neutral policy rate, the economy’s potential growth rate, and the level of maximum employment.” These uncertainties “would remain an important factor affecting their decisionmaking.”