US Federal Reserve officials acknowledged that inflation could prove to be more persistent than expected as they deal with the uncertainty surrounding President Donald Trump's <a href="https://www.thenationalnews.com/news/2025/04/09/trump-orders-90-day-pause-on-tariffs-except-for-china/" target="_blank">tariffs</a>, according to minutes from their March meeting. “Participants generally saw increased downside risks to employment and economic growth and upside risks to inflation, while indicating that high uncertainty surrounded their economic outlooks,” read the minutes, released on Wednesday. Fed officials also expect higher tariffs to probably boost inflation this year, “although significant uncertainty surrounded the magnitude and persistence of such effects”. The <a href="https://www.thenationalnews.com/tags/federal-reserve/" target="_blank">Fed</a> maintained <a href="https://www.thenationalnews.com/business/economy/2025/03/19/federal-reserve-interest-rates-decision/" target="_blank">US interest rates</a> at about 4.3 per cent when the committee met last month. Updated projections showed the regulator raised its inflation outlook while lowering its growth forecast, largely due to tariff uncertainty. Officials said they could face “difficult trade-offs” if inflation is more persistent. Unlike most other central banks, the Fed has the task of maintaining price stability and full employment. The minutes showed officials considered downside risks remain for the labour market. Uncertainty over Mr Trump's tariffs have led to increased volatility in stock markets, which began a steep sell-off last week before rallying on Wednesday amid news that he was issuing a <a href="https://www.thenationalnews.com/news/2025/04/09/trump-orders-90-day-pause-on-tariffs-except-for-china/" target="_blank">90-day pause</a> on trade levies for most countries. Although the Fed minutes came before this month's tariff saga, they show US central bankers want more clarity before determining the next move on interest rates, said Bernard Yaros, lead US economist at Oxford Economics. "This inclination to wait is unlikely to change following the dramatic events of the past week, and FOMC [Federal Open Market Committee] participants are wary of the potential persistence to inflation amid rising trade protectionism," he wrote. That uncertainty has also sparked fears of a possible economic slowdown in the US. Traders have increased their rate-cut projections in recent weeks on the hopes the Fed would swoop in to reignite growth. But Fed chairman <a href="https://www.thenationalnews.com/tags/jerome-powell/" target="_blank">Jerome Powell</a> essentially ruled out a rate cut in May, saying last week the central bank was not in a rush. “It is too soon to say what will be the appropriate path for monetary policy,” he said during an event in Arlington, Virginia. He said the planned retaliatory tariffs and their effects would be larger than expected. That was broadly in line with minutes from the March meeting, in which officials said it would be appropriate to take a “cautious approach” due to the uncertainty surrounding Mr Trump's policies on the economic outlook. Minneapolis Fed president Neel Kashkari became the latest central bank official to throw his support behind this cautious approach “Given the paramount importance of keeping long-run inflation expectations anchored and the likely boost to near-term inflation from tariffs, the bar for cutting rates even in the face of a weakening economy and potentially increased unemployment is higher,” he wrote in an essay.
