Higher inflation persistence opens door to another rate hike, Fed minutes show

If inflation remains elevated, the Federal Reserve may raise interest rates again, affecting borrowing costs across the economy. Some participants in the March Federal Open Market Committee meeting judged there was a strong case for signaling that upward adjustments to the federal funds rate could be appropriate if inflation stayed above target. That marks a shift from January, when only several officials supported leaving the door open to hikes. By March, many participants pointed to the risk of inflation remaining high, driven by a more than 50% jump in oil prices due to Middle East conflict. The Fed held its benchmark rate steady in the 3.50%3.75% range, but the minutes reveal growing concern that inflation could prove more persistent than expected. Since 2021, inflation has consistently exceeded the Fed's target. Staff projections now reflect higher inflation for the year, with little anticipated change in unemployment. Global shipping disruptions intensified cost pressures. While a U.S.-Iran ceasefire pushed oil prices down more than 15% to about $92 a barrel, the underlying risk remains: if inflation proves sticky, the Fed is prepared to act.