Federal Reserve meeting minutes: US-Iran war may further drive up inflation, not ruling out possibility of raising interest rates again under certain circumstances.

The latest released minutes from the Federal Reserve's March interest rate meeting show that an increasing number of policymakers are starting to worry that a US-Iran war could further push up inflation, and they believe that it may be necessary to consider raising interest rates again under certain circumstances. The minutes from the meeting on March 17th and 18th showed that officials had intense discussions about the impact of the war on the US economy. Most members believed that if the conflict persists, it will drag down the job market, thus supporting a rate cut; however, at the same time, many officials emphasized that the inflationary pressure from surging energy prices may ultimately force a shift towards tightening policy. Some officials who are more concerned about inflation suggested incorporating the concept of a "two-way policy path" in the post-meeting statement, indicating that there is room to raise the federal funds rate if inflation remains persistently above the target level. The minutes noted that the number of officials supporting this view had significantly increased compared to before. Despite this, the committee as a whole maintained a wait-and-see attitude. The decision of this meeting was to keep the benchmark interest rate unchanged in the range of 3.5% to 3.75%. Analysts believe that this reflects the complex balancing act that the Federal Reserve faces between inflation and growth risks. At the time of the meeting, tensions in the Middle East had already led to a global rise in energy prices, putting upward pressure on inflation and also posing a threat to economic growth prospects. The minutes noted that "the vast majority" of officials believed that it may take longer to bring the inflation rate back to the 2% target. In addition, long-term inflation expectations could also become more sensitive to fluctuations in energy prices. In terms of employment, most officials expected the overall unemployment rate to remain stable, but they also acknowledged downside risks in the labor market, especially in a context of slowing job growth, making the economy more vulnerable to external shocks. Regarding policy outlook, the Federal Reserve still expects to have one rate cut in 2026, consistent with previous expectations. However, rate futures markets show that investors' expectations for a rate cut within the year are diminishing. It is worth noting that despite Trump's recent announcement of a ceasefire agreement with Iran and plans for direct negotiations, sporadic conflicts in the region continue, and there are signs of the ceasefire agreement being violated, adding uncertainty to the energy market and monetary policy outlook.