FOMC March Minutes Reflect Central Bank's Caution

FOMC March Minutes Reflect Central Bank's Caution

Interest rate cuts in May and June are now unlikely.

Finance Reporter
Reviewed by: Staff
Edited by: James Rubin

A cautious U.S. central bank was concerned enough about recent upticks in inflation and mixed economic data that it would not commit to present or future cuts to the federal funds rate, according to minutes of the bank's Federal Open Market Committee's (FOMC) March meeting. 

FOMC, which typically meets eight times per year to discuss potential changes to monetary policy, left the rate unchanged at between 5% and 5.25%, where it's stood since last July after the last of a series of increases to the funds rate—the short-term interest rate commercial banks charge one another on borrowing and lending their excess reserves. 

"Members concurred that, in considering any adjustments to the target range for the federal funds rate, they would carefully assess incoming data, the evolving outlook and the balance of risks," according to the minutes, adding that "they did not would be appropriate to reduce the target range until they have gained greater confidence that inflation is moving sustainable toward its 2 percent" target.

The minutes' publication on Wednesday coincided with the release of the March Consumer Price Index, which increased an unexpectedly hot 0.4% month-over-month. Economists polled by Dow Jones had expected CPI to arrive at 0.3%. The CPI jump followed discouraging reports in January and February suggesting that 15 months of Fed monetary hawkishness in 2022 and 2023 had not done enough to tame inflation and sent stocks, including a number of major ETFs, swooning. 

Read More: The Best ETFs for Inflation in 2024

Markets were rebounding Thursday after an unexpectedly weak Producer Price Index (PPI) offered investors some hope that that price increases would not be so dire. 

The S&P 500 was up the better part of a percentage point in mid-Thursday trading, while the tech-heavy Nasdaq rose about 1.3%. The SPDR S&P 500 ETF Trust (SPY) and Vanguard S&P 500 (VOO) ETFs were both recently changing hands up about 0.7%. 

In the March meeting, Fed policymakers noted that despite increased interest rates, broad stock price indexes had "increased notably amid upbeat corporate earnings reports, particularly for the largest firms. The S&P 500 has hit several new highs in 2024. 

Rate Cuts Less Probable

Yet several Fed members concurred that economic data "had not increased their confidence" that higher CPI numbers this year were "statistical aberrations." And the minutes showed members' worries about the impact "that elevated inflation continued to harm households, particularly those least able to meet the higher costs of essentials like food, housing, and transportation."

The CME FedWatch tool is now predicting a less than 3% probability that the Fed will cut the funds rate at its next meeting in May, and just a 20% chance of a rate decrease in June. 

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Investors at the start of the year had expected rate decreases to begin in the first half of 2024 following a steady decline in inflation last year. 

Still, the Fed remains "confident 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 should the disinflation process slow,” according to the minutes.  

Contact Lucy Brewster at [email protected].

Lucy Brewster is a finance reporter at covering asset managers, emerging technologies, and regulation. She hosts webinars and appears on Exchange Traded Fridays,’s flagship podcast. She previously was a finance fellow at Fortune Magazine where she covered markets, investment strategy, and venture capital. She has also been a freelancer writer at the publication Mergers & Acquisitions and a research fellow at the Historic Hudson Valley. 

She graduated from Vassar College in 2022 with a degree in History and was an editor of The Miscellany News, the college's award winning student run newspaper. 

Lucy lives in Brooklyn, NY, and in her free time she loves to run and find new recipes to cook.