Newsroom

Federal Open Market Committee (FOMC) members pointed to a positive economic outlook in minutes released Wednesday from the committee's March meeting. However, they noted potential risks to the U.S. economy of "retaliatory trade actions" between the U.S. and other countries.

"The FOMC minutes reflect a degree of uncertainty for the committee with regard to tariffs and the tax subsidy, and their potential impact on inflation," said NAFCU Chief Economist and Vice President of Research Curt Long. "The committee does appear unified in their expectation that inflation will rise to a level near its 2 percent target shortly. If it settles at that level, the committee would likely proceed with two additional rate hikes this year, as forecasted. However, if price growth continues to strengthen, a third rate increase is more likely than not."

At the close of its two-day policy-setting meeting in March, the FOMC did increase the federal funds target rate by a quarter-point to a range of 1.5 to 1.75 percent. Wednesday's minutes revealed that all committee members expect inflation to move up in the months ahead.

The minutes also noted discussions about the tax changes enacted last year and the recent federal budget agreement. Members expect that these will "provide a significant boost to output over the next few years."

Looking at monetary policy in the medium term, FOMC members said the committee is likely to firm up its stance. The minutes noted that a stronger outlook on economic activity by a number of participants, along with confidence that inflation will return to 2 percent in the coming months, implies that "the appropriate path for the federal funds rate over the next few years would likely be slightly steeper than they had previously expected."