The Federal Reserve's March meeting minutes are coming: How do officials really view the impact of the war on the economy?

Ask AI · How War Is Reshaping the Federal Reserve’s Economic Assessment Framework?

The Federal Reserve will release the minutes of its March meeting on Wednesday local time, with markets broadly expecting them to reveal in detail policymakers’ deep concerns about the global oil shock triggered by the Middle East conflict, and to provide key policy clues for assessing the current highly uncertain economic outlook.

According to Xinhua News Agency, Trump made concessions, agreeing to a temporary ceasefire for two weeks. Brent crude oil has fallen back below $100 per barrel; however, the war has substantially reshaped the Fed’s economic assessment framework, with stagflation risks becoming a core concern.

The most direct policy signal is reflected in the reversal of the interest rate path. Previously, markets widely expected multiple rate cuts within the year, but this has now evolved into a policy stance of potential prolonged wait-and-see for years. Investors currently expect that the Fed will not adjust the current policy rate range of 3.5% to 3.75% until the end of 2027.

The upcoming minutes will become a market focus. Investors will closely watch how policymakers balance the rising energy costs’ upward pressure on inflation against the potential drag that could suppress consumer spending and economic momentum.

Powell: Multiple scenarios analyzed, high uncertainty

At the Federal Reserve’s monetary policy meeting on March 17-18, the global oil shock had entered its third week, with benchmark oil prices soaring from about $70 per barrel to $100. The latest economic forecasts released after the meeting show that almost all policymakers have raised their inflation expectations for 2026.

Fed Chair Jerome Powell stated at the post-meeting press conference that multiple scenario analyses had been incorporated into the discussion. Such analyses are usually part of the staff’s economic outlook reports and are expected to be detailed in the minutes.

Powell also emphasized the high level of uncertainty. He pointed out that, regarding the duration of the war and its impact on U.S. and global economic growth and prices, the Fed “should not assume that the situation will necessarily develop in a particular direction.”

Inflation concerns intensify: some officials considered signals of rate hikes

Faced with a complex macro environment, the Fed decided at the March meeting to keep the policy rate in the range of 3.5% to 3.75%, without releasing a clear signal of near-term adjustments. This decision marks a significant shift in policy stance. The previously widely expected rate cuts within the year have been completely phased out, replaced by a long-term wait-and-see approach.

As early as January this year, before the outbreak of war, some Fed officials had expressed concerns about inflation trends. At that time, data showed inflation appeared to be stuck about one percentage point above the 2% target, with some officials even indicating readiness to signal the need for rate hikes.

Although the March policy statement did not modify language to suggest the possibility of rate hikes, the upcoming minutes may reveal whether policymakers’ sentiment has further tilted toward tightening. The minutes are expected to show how officials assess the dual risks posed by the oil shock: whether inflation targets face greater threats, or whether consumer resilience to rising energy costs and the risk of economic slowdown and employment weakness are more pressing.

Before the ceasefire announcement on Tuesday, Chicago Fed President Goolsbee expressed a pessimistic view of the situation. He said he was originally optimistic about inflation returning to 2%, but recent developments have shifted the “orange alert to red.” Goolsbee pointed out that the tariffs that previously pushed prices higher have not receded as expected, and now new stagflation shocks have been added, making it an “unsettling moment.”