Fed policymakers flag possible rate hikes to tackle inflation

WASHINGTON

Many U.S. central bank policymakers cited the possible need for interest rate hikes to counter the risk of sustained inflation from high oil prices, minutes of their recent meeting showed.

The U.S. Federal Reserve has been battling to bring inflation down to its long-term two percent target since the pandemic.

In March, the Fed chose to extend a pause on interest rate cuts — after three reductions in late 2025 — and raised its inflation forecast.

At the meeting, officials flagged one expected cut by the end of the year, and cited an "uncertain" economic outlook due to the war in the Middle East.

Minutes of its last meeting, which took place March 17-18, showed there was concern about the lack of progress in bringing inflation down.

"Some participants noted that the rate of increase in core goods prices remained well above the pace likely to be consistent with the sustainable achievement of the Committee's inflation objective, at least in part reflecting the effects of tariffs," the minutes said.

Moreover, Fed policymakers signaled concern that persistently high oil prices due to the conflict in the Middle East could bleed through into core inflation.

"Some participants highlighted the possibility that, after several years of above-target inflation, longer-term inflation expectations could become more sensitive to energy price increases," the minutes said.

"Many participants pointed to the risk of inflation remaining elevated for longer than expected amid a persistent increase in oil prices, which could call for rate increases to help bring inflation down to the Committee's two percent objective," the minutes said.