The minutes from the FOMC’s March meeting revealed growing concern among policymakers about the economic outlook, particularly amid rising uncertainty. While these discussions occurred before the dramatic escalation of the US tariff war in April, the insights remain valuable.

“Almost all” participants viewed inflation risks as tilted to the “upside”, while “downside” risks to employment and growth were also flagged—setting the stage for a policy dilemma.

Some officials highlighted that the Fed could soon face “difficult tradeoffs,” especially if inflation remains elevated while job and growth prospects deteriorate.

Notably, a few participants also warned that an “abrupt repricing of risk in financial markets” could magnify the impact of any negative economic shocks. Given what has since transpired with global markets in April, these comments seem prescient.

While the minutes may now appear somewhat outdated, they nonetheless provide a crucial baseline for understanding how the Fed might react in an increasingly fragile environment.

Full FOMC minutes here.

Minneapolis Fed President Neel Kashkari warned that the unexpectedly high and broad scope of recently imposed US tariffs has created “larger direct economic effect and larger shock to confidence”.

In a blog post today, he noted that this has increased the “hurdle” for Fed to adjust interest rates in either direction. He emphasized that due to the inflationary pressures tariffs are likely to bring in the “near term”, the bar for cutting rates is also “higher” even in the face of rising unemployment.

Kashkari expressed concern that due to uncertainty of escalating trade tensions and retaliatory measures from other countries, “risk of unanchoring inflation expectations seems to have increased notably”.

At the same time, he acknowledged that the demand for investment capital is likely to decline due to weaker growth prospects, which would naturally lower the neutral interest rate (r*). This dynamic could make current monetary policy stance relatively tighter without any Fed action.

Ultimately, Kashkari struck a cautious but flexible tone, noting that while Fed should be especially wary of cutting rates amid rising inflation risks, it must also remain responsive to rapidly changing conditions.

“No monetary policy response, up or down, should be completely off the table,” he concluded.

Full article of Fed’s Kashkari here.

Chicago Fed President Austan Goolsbee and San Francisco Fed President Mary Daly both sounded cautious overnight amid rising uncertainty from the unfolding global tariff war.

Goolsbee highlighted the unexpected magnitude of the tariff impact, calling them a “way bigger” shock than anticipated. He likened them to a “negative supply shock” and acknowledged that Fed’s appropriate policy response is unclear.

He warned of ripple effects through slower consumer and business activity, especially in a post-pandemic economy still scarred by past inflationary surges.

Meanwhile, Daly struck a more measured tone, noting that while she is “a little concerned” about the inflationary effects of tariffs, she emphasized Fed’s current policy is well-positioned and policymarkers can “just tread slowly and tread carefully.”

“The thing that’s really important is you stay steady in the boat while you think about not what’s happening over the last two days, but the net effect of the slate of changes that any administration wants to take,” she added.

Chicago Fed President Austan Goolsbee expressed concern that escalating trade tensions—through tariffs, retaliations, and potential counter-retaliations—could recreate the turbulent economic conditions of 2021–2022 when inflation was “raging out of control.”

In an interview with CNN, he warned that if the tariff threats materialize to their full extent, especially if met with proportionate responses, the US economy risks slipping back into a period of high inflation and stagnating growth.

However, Goolsbee also acknowledged that the situation remains fluid. He noted that negotiations could yet defuse the tension, especially if they result in new trade agreements. Referring to Treasury Secretary Scott Bessent’s optimism about a coming “golden age of trade.”

If stagflation begins to take hold, Goolsbee stressed, the Fed’s response would not be straightforward. The appropriate policy path would depend heavily on how growth and inflation evolve in the coming months.

“Our job is to look at the hard data,” he said, underlining that in a scenario where both growth weakens and prices surge, there’s no “generic answer” to guide monetary policy.

Fed Governor Adriana Kugler emphasized the importance of keeping inflation expectations well anchored in comments delivered to a Harvard economics class.

She reaffirmed the Fed’s commitment to the 2% inflation target and stressed “It should be a priority to make sure that inflation doesn’t move up”.

Kugler also noted that economic activity in the first quarter may have been stronger than previously anticipated, driven by consumer front-loading ahead of expected tariff hikes.

While the full extent of tariff-related cost pass-through is yet to be seen, she acknowledged the financial strain such developments could place on households. That, she argued, is “exactly why we think we need to keep focus on that.”