Federal Reserve officials at their March meeting expressed concern that inflation wasn’t moving lower quickly enough, though they still expected to cut interest rates at some point this year.

At a meeting in which the Federal Open Market Committee again voted to hold short-term borrowing rates steady, policymakers also showed misgivings that inflation, while easing, wasn’t doing so in a convincing enough fashion. The Fed currently targets its benchmark rate between 5.25%-5.5%

As such, FOMC members voted to keep language in the post-meeting statement that they wouldn’t be cutting rates until they “gained greater confidence” that inflation was on a steady path back to the central bank’s 2% annual target.

“Participants generally noted their uncertainty about the persistence of high inflation and expressed the view that recent data had not increased their confidence that inflation was moving sustainably down to 2 percent,” the minutes stated.

In what apparently was a lengthy discussion about inflation at the meeting, officials cited geopolitical turmoil and rising energy prices as risks to pushing inflation higher. They also cited the potential that looser policy could add to price pressures.

On the downside, they cited a more balanced labor market, enhanced technology along with economic weakness in China and a deteriorating commercial real estate market.

They also discussed higher-than-expected inflation readings in January and February. Chair Jerome Powell said that it’s possible the two months readings were caused by seasonal issues, though he added it’s hard to tell at this point. There were members at the meeting who disagreed.

“Some participants noted that the recent increases in inflation had been relatively broad based and therefore should not be discounted as merely statistical aberrations,” the minutes stated.

That part of the discussion was partly relevant considering the release came the same day that the Fed received more bad news on inflation.

CPI validates their concern

The consumer price index, a popular inflation gauge though not the one the Fed most closely focuses on, showed a 12-month rate of 3.5% in March. That was both above market expectations and represented an increase of 0.3 percentage point from February, giving rise to the idea that hot readings to start the year may not have been an aberration.

Following the CPI release, traders in the fed funds futures market recalibrated their expectations. Market pricing now implies the first rate cut to come in September, for a total of just two this year. Previous to the release, the odds were in favor of the first reduction coming in June, with three total, in line with the “dot plot” projections released after the March meeting.

The discussion at the meeting indicated that “almost all participants judged that it would be appropriate to move policy to a less restrictive stance at some point this year if the economy evolved broadly as they expected,” the minutes stated. “In support of this view, they noted that the disinflation process was continuing along a path that was generally expected to be somewhat uneven.”

In other action at the meeting, officials discussed the possibility of ending the balance sheet reduction. The Fed has shaved about $1.5 trillion off its holdings of Treasurys and mortgage-backed securities by allowing up to $95 billion in proceeds from maturing bonds to roll off each month rather than reinvesting them.

There were no decisions made or indications about how the easing of what has become known as “quantitative tightening” will happen, though the minutes said the roll-off would be cut by “roughly half” from its current pace and the process should start “fairly soon.” Most market economists expect the process to begin in the next month or two.

The minutes noted that members believe a “cautious” approach should be taken.

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