FOMC MINUTES: Many policymakers would have preferred to remove easing bias from policy statement; majority saw hike likely warranted if inflation persists

Inflation

• Some participants expressed concerns, however, about a scenario in which sustained elevated energy prices, combined with the effects of tariffs, could result in inflation pressures becoming embedded more broadly,  potentially de-anchoring inflation expectations and creating a greater tradeoff between the Committee's employment and inflation goals.
• Some participants noted that recent price increases in the information technology sector had contributed to higher inflation.
• A few of these participants remarked that, while price increases in the software category were contributing meaningfully to the increase in core inflation, price increases in that category may not be good predictors of future overall inflation.
• Most participants noted that measures of longer-term inflation expectations remained stable.
• Participants anticipated that high energy prices would continue to put upward pressure on overall inflation in the near term.
• Participants generally expected that the effects of tariffs on core goods inflation would diminish over the course of this year.

Labour

• Most participants judged that recent data, such as readings on the unemployment rate, layoffs, hiring, and labor force growth, suggested stabilization in the labor market.
• Several participants commented that the recent low rates of job growth were not necessarily indicative of labor market fragility, as they could be roughly commensurate with the recent slow growth in the labor force.
• A few participants, however, pointed to the possibility that the low rates of job growth were a sign of labor market fragility.
• Some participants noted some signs of potential softness in the labor market, including the concentration of job growth in only a few sectors, declines in recent months in survey measures of job availability, and the modest rate of wage growth.
• Participants generally expected labor market conditions to remain stable in the near term.
• Most participants judged, however, that risks to the employment side of the Committee's dual mandate were tilted to the downside.

Policy

• Participants generally judged that the continued elevated inflation readings together with uncertainty related to the duration and economic implications of the Middle East conflict could necessitate maintaining the current policy stance for longer than previously anticipated.
• Several participants highlighted that it would likely be appropriate to lower the target range for the federal funds rate once there are clear indications that disinflation is firmly back on track or if solid signs emerge of greater weakness in the labor market.
• A majority of participants highlighted, however, that some policy firming would likely become appropriate if inflation were to continue to run persistently above 2%.
• Almost all participants supported maintaining the current target range for the federal funds rate at this meeting.

Fed statement

• A majority of participants highlighted that some policy firming would likely become appropriate if inflation were to continue to run persistently above 2%.
• To address this possibility, many participants indicated that they would have preferred removing the language from the postmeeting statement that suggested an easing bias regarding the likely.

Staff Economic Outlook

• The staff's outlook for economic activity was slightly stronger than the one prepared for the March meeting.

Balance Sheet

• A few participants commented on issues related to the Federal Reserve's balance sheet and policy tools, including the role of SRP operations in the implementation of monetary policy and the connection between liquidity tools, liquidity regulations, and the demand for reserves.