FOMC Minutes Signal Fed Saw “Dual Sided” Risks From Iran War

Since the last FOMC meeting (March 18th), a lot has happened (war, more war, and now less war), and rate-change expectations hawkishly surged, then dovishly normalized today…

And given the last 24 hours, perhaps this information is more useful now, as we return to macro-fundamentals from geopolitical chaos running markets.

Fed officials wrestled with starkly differing scenarios for the US economy following the outbreak of the Iran war, including one that called for interest-rate cuts and another that would require raising rates.

Key Highlights (via Bloomberg):

• *FED: MOST SAID PROTRACTED WAR COULD HIT JOBS, WARRANT CUTS

• *FED: SOME SAW `STRONG CASE’ FOR TWO-SIDED LANGUAGE ON RATE PATH

• *FED: TARIFF EFFECTS ON GOODS PRICES HAD BECOME MORE UNCERTAIN

• *FED: MANY SAID INFLATION HIGHER FOR LONGER COULD CALL FOR HIKES

• *FED: VAST MAJORITY SAID INFLATION PROGRESS COULD BE SLOWER

• *FED: VAST MAJORITY SAW EMPLOYMENT RISKS AS SKEWED TO DOWNSIDE

• *MOST JUDGED RECENT DATA SHOWED LABOR `BROADLY IN BALANCE’

Minutes of the meeting showed most officials worried the war could hurt the labor market and warrant lower interest rates.

At the same time, many policymakers highlighted the risk to inflation that might ultimately warrant rate increases.

The record of the meeting also showed that a growing number of officials urged their colleagues to consider language in the committee’s statement raising the scenario of hiking interest rates under certain conditions.

“Some participants judged that there was a strong case for a two-sided description of the committee’s future interest-rate decisions in the post-meeting statement, reflecting the possibility that upward adjustments to the target range for the federal funds rate could be appropriate if inflation were to remain at above-target levels,” the minutes said.

Developing…

Read the full Minutes below: