Minutes of the Federal Open Market,March 18–19, 2025 Committee

Monetary Policy Review - The Federal Open Market Committee (FOMC) discussed the review of its monetary policy framework, focusing on labor market dynamics and the goal of maximum employment, acknowledging the difficulty in measuring maximum employment due to nonmonetary factors [3][4][5] - Participants supported the current description of maximum employment as a broad and inclusive goal, emphasizing the importance of monitoring a wide range of labor market indicators [4][6] Financial Market Developments - Treasury yields declined, equity prices fell, and credit spreads widened, reflecting increased perceived risks in the U.S. economic outlook due to weaker-than-expected consumer spending and trade policy uncertainties [7][8] - The implied average federal funds rate path shifted lower for horizons beyond mid-2025, with higher probabilities assigned to lower GDP growth and higher inflation outcomes compared to previous surveys [8][9] Economic Situation - Real GDP was expanding at a solid pace, with the unemployment rate stabilizing at 4.1% in February, while consumer price inflation was estimated at 2.5% [17][18][19] - Labor market conditions remained solid, with average monthly gains in nonfarm payrolls lower than the previous year, and the ratio of job vacancies to unemployed workers was 1.1 in February [19][20] Inflation Outlook - Inflation remained somewhat elevated, with core PCE price inflation estimated at 2.8% in February, and participants noted that inflation data in early 2025 were higher than expected [18][39] - Participants expressed concerns that inflation could be boosted by higher tariffs, with significant uncertainty surrounding the magnitude and persistence of these effects [40][41] Monetary Policy Actions - The FOMC decided to maintain the target range for the federal funds rate at 4¼ to 4½ percent, with a majority agreeing to slow the pace of securities holdings reduction [52][57] - The monthly redemption cap on Treasury securities was reduced from $25 billion to $5 billion, while the cap on agency debt and mortgage-backed securities remained at $35 billion [52][57] Economic Projections - Staff projections indicated weaker real GDP growth than previously expected, with the unemployment rate forecast to edge up but remain close to its natural rate [33][34] - The staff's inflation projection was slightly higher for 2025, reflecting higher-than-expected incoming data, with inflation expected to decline to 2% by 2027 [34][35]