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Inside the Fed’s March Meeting: The Annotated Minutes

Inside the Fed's March Meeting: The Annotated Minutes

Federal Reserve Chairman Jerome Powell

Photographer: Andrew Harrer/Bloomberg

How to balance tax cuts and trade wars.

New Fed Chair Jerome Powell presided over his first interest rate increase in March when monetary policymakers unanimously voted to lift the central bank’s rate to a range of 150 to 175 basis points—and hinted at more tightening to come.

With Wednesday’s release of minutes from that meeting, we’ll get a sense of how they’re grappling with the two biggest unknowns in the Fed’s outlook: how much the tax overhaul bill can juice growth, and how much a trade fight could weaken activity.

Dallas Fed President Robert Kaplan recently warned that a prolonged trade conflict between the China and the U.S. could have a “chilling effect” on the economy. Last week, Powell cautioned that it was too early to judge the effect of potential border-thickening between the world’s two largest economies; incoming New York Fed President John Williams said the proposed measures thus far “don’t add up to a huge effect on the economy.”

Meanwhile, March’s dot plot implies a modestly more aggressive pace of tightening from the central bank in 2019 and 2020, as the U.S. economy expands more rapidly than previously projected and the unemployment rate falls to 3.6 percent. This rosier view is tied to the expectation that tax cuts will boost aggregate demand. Yet Fed officials still don’t see a firmer expansion and above-trend job growth stoking a major short-term acceleration in price pressures; annual core PCE inflation is expected to reach 1.9 percent by year-end.

Investors may also be scanning the minutes for clues on the strike price of any “Powell put” for U.S. stocks amid renewed volatility in financial markets.

Follow along as we annotate the minutes.

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