Fed wants more confidence that inflation is moving toward 2% target, meeting minutes indicate

We’re going to go to Steve Liesman now with the Fed Minutes. Tyler, thank you. Minutes to the Federal Reserve’s March meeting show there was general agreement that the Fed policy rate was at the peak and almost all judged it would be appropriate to reduce rates if the economy evolved as expected. Hold that thought because they later go on to say that participants did not see it as appropriate to reduce the rates if they weren’t confident that inflation was falling towards its 2% target. A lot of that is in the statement. What we see in these minutes is the beginning of a debate between Hawks and doves. How to think about the inflation numbers that come out above expectations 2 months in a row before this meeting? And So what you have is a wing of Hawks that we’ve now heard publicly saying. Things like the recent inflation reports have reduced participants overall confidence that inflation was indeed moving towards the 2% target. Some saw these inflation increases as broad. They were concerned about it and argued they should not be discounted as the market did at the time as well as some members of the Fed. They noted geopolitical risks that could, for example, increase inflation by hurting the supply chain and also noted financial conditions becoming less restrictive. Said that the primary source of disinflation was improving the supply chain and that that could moderate overtime. Now there of course were doves at the meeting that were less inclined to be concerned about the recent inflation numbers. They blame that issue. We’ve talked about residual seasonality that is the tendency of some prices to rise at the beginning of the year. They said they expected core non housing services inflation. That number that Fed Chair Powell has pointed to to decline over time as the labor market. Moved into better balance and wage growth. Moderated. Some of them were upbeat on productivity. Overall. They agreed that this unevenness they were seeing was anticipated and and part of what they had expected. But there were disagreements over what to do with a couple other points. There was consensus that policy was in a good place to either remain high for a long time or go down as the economy increased. There was no talk about rate hikes that I could see in the minutes here. The risk to the dual band that we’re seeing moving into better balance, just a couple quick notes here on the balance sheet, the staff advised the committee. Cautious approach to further runoff of the balance sheet that meant maybe slow it down. The majority of participants felt it was prudent to slow the balance sheet runoff quote fairly soon. And there was talk about having the pace of the runoff, which is now $95 billion a month, so cutting that number in half, Tyler.