Discussions about uncertainties surrounding the outlook for U.S. economic activity, the labor market, and inflation trends dominated the conversations at the latest Federal Open Market Committee (FOMC) meeting, the monetary policy committee of the Federal Reserve (the American central bank). This information was revealed in the minutes from the meeting held on March 19 and 20, released on Wednesday (10).

At that time, the Open Market Committee decided to maintain the federal funds rate at its current level. The rate has been fluctuating within a range of 5.25% to 5.50% per annum since July of the previous year.

According to the Fed’s document, some participants further mentioned uncertainty about the extent to which past monetary policy actions or the current policy stance would continue to weigh on aggregate demand.

“Overall, participants highlighted their uncertainty about the persistence of high inflation and expressed the view that recent data had not increased their confidence that inflation is moving sustainably towards 2%,” the minutes stated. This perception may have been reinforced by data released on Wednesday showing another surprising jump in inflation.

The text indicates that FOMC participants cited indicators pointing to strong economic momentum and disappointing inflation readings in recent months.

They also commented that they did not expect it would be appropriate to lower the target range for the federal funds rate until they had greater confidence that inflation was sustainably moving towards the 2% per annum target.

“Participants emphasized the importance of continuing to communicate clearly the Committee’s data-dependent approach to monetary policy formulation and the strong commitment to achieving its dual mandate goals of maximum employment and price stability,” the minutes read.

However, the officials agreed that monetary policy remained well-positioned to respond to evolving economic conditions and risks to the outlook, including the possibility of maintaining the current restrictive policy stance for longer if the disinflation process slowed down. Or even to lessen the restraint in case of an unexpected weakening of labor market conditions.

In the discussions on monetary policy, the members agreed that economic activity was expanding at a solid pace and that employment gains remained strong, while the unemployment rate stayed low.

The members agreed they remained very alert to inflation risks. “Some participants noted that recent increases in inflation were relatively broad-based and therefore should not be dismissed as mere statistical aberrations. However, they noted that residual seasonality could have affected inflation readings early in the year.”