WASHINGTON — Federal Reserve policymakers have raised the possibility of interest rate hikes to combat persistent inflation, driven in part by soaring oil prices linked to the ongoing Middle East conflict, according to minutes released Wednesday from their March meeting.
While the Fed maintained a pause on rate cuts in March—following three reductions in late 2025—officials expressed concern over stalled progress in reducing inflation toward the central bank's long-term 2% target. The minutes revealed that "some participants" highlighted the risk that high energy costs could spill over into core inflation, which typically excludes volatile food and energy prices.
"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 stated.
The economic outlook has been clouded by the U.S.-Israeli war on Iran, which began on February 28 and has disrupted global oil markets. Tehran's virtual closure of the Strait of Hormuz sent oil prices skyrocketing, exacerbating inflationary pressures. Despite a ceasefire announced late Tuesday, uncertainty persists, with reports suggesting the strait may remain closed.
Fed officials also pointed to the impact of tariffs imposed by the Trump administration, which have roiled the U.S. economy and global trade. Many of these tariffs were struck down by the Supreme Court, only to be reinstated at lower levels using alternative legal authorities.
The central bank's dual mandate of maintaining price stability and maximum employment has been challenged by these external factors. "A couple" of meeting participants delayed their expectations for rate cuts due to recent inflation data, signaling a cautious approach ahead.
As the Fed weighs its next moves, the minutes underscore the delicate balance between supporting economic growth and taming inflation in a volatile geopolitical landscape.