Fed's March Meeting Minutes Ahead: How Do Officials View the Impact of the War on the Economy?

The Federal Reserve will release its March meeting minutes on Wednesday, with market expectations widely anticipating detailed revelations of policymakers' deep concerns about the global oil shock triggered by the Middle East conflict, and providing key policy clues for assessing the current highly uncertain economic outlook. According to Xinhua News Agency, Trump has made a concession, agreeing to a temporary two-week ceasefire. Brent crude has fallen back below $100 per barrel. However, the war has substantially reshaped the Fed's economic assessment framework, with the risk of stagflation becoming a core concern. The most direct policy signal is reflected in the reversal of the interest rate path. The previously widely expected multiple interest rate cuts within the year have now evolved into a policy wait-and-see that could last for several years. Investors currently anticipate that the Federal Reserve may not adjust the current policy rate range of 3.5% to 3.75% until the end of 2027. The upcoming meeting minutes will be the focus of the market. Investors will closely watch how policymakers weigh the upward pressure on inflation targets from soaring energy costs against the drag that could curb consumer spending and economic momentum. Powell: Multiple Scenarios Incorporated, Uncertainty Remains High At the Federal Reserve's monetary policy meeting on March 17-18, the global oil shock entered its third week, with benchmark oil prices surging from around $70 per barrel to $100. The latest economic forecasts released after the meeting showed that nearly all policymakers revised upwards their inflation expectations for 2026. Fed Chairman Powell stated at the post-meeting press conference that multiple scenarios were incorporated into the discussions. Such analyses are typically part of the staff's economic outlook report and are expected to be detailed in the meeting minutes. Powell also emphasized the high degree of uncertainty surrounding the situation. He pointed out that regarding the duration of the conflict and its impact on economic growth and prices in the United States and globally, the Fed "should not assume that circumstances will necessarily move in a particular direction." Inflation Concerns Escalate: Some Officials Considered Signaling Rate Hikes In the face of a complex macroeconomic environment, the Federal Reserve decided at its March meeting to maintain the policy rate at the 3.5% to 3.75% range, without releasing a clear signal of short-term adjustments. This decision marked a significant shift in policy stance. The previously widely anticipated rate cuts within the year have completely faded, replaced by a prolonged policy wait-and-see approach. As early as January of this year, before the war broke out, some Fed officials had expressed concerns about inflation trends. Data at the time indicated that inflation appeared to be stagnating at a level about one percentage point above the 2% target, with some officials even stating they were prepared to signal a potential need for rate hikes. Although the Federal Reserve did not change its wording in the March policy statement to suggest the possibility of rate hikes, the upcoming meeting minutes may reveal whether policymakers' sentiment has further shifted towards rate hikes. The minutes are expected to show how central bank officials are assessing the dual risks posed by the oil shock: whether the inflation target faces greater threats, or whether consumers face a higher risk of economic slowdown and weakening employment due to rising energy costs. Chicago Fed President Goolsbee expressed a pessimistic view of the situation on Tuesday, before the ceasefire announcement. He stated that while he was previously optimistic about inflation returning to the 2% path, the recent situation has escalated from an "orange alert to red." Goolsbee pointed out that the impact of tariffs that previously drove up prices has not dissipated as expected, and now new stagflationary shocks have been added, which is undoubtedly a "disturbing moment."