Precious Metals Talking points 040926 Federal Reserve Minutes; wrap and analysis

Talking points; Federal Reserve March Minutes

Rhona O'Connell, Head of Market Analysis, EMEA & Asia

 Tel: +44 203 580 6115 / mobile +44 7384 833897

Fed Minutes March 2026 – walking through treacle

Fed funds target rate 3.50-3.75%

Source: Federal Reserve Board

The Minutes of the March meeting show how the onset of war in the Gulf bifurcated the Committee with some arguing for lower rates due to the impact on the economy, notably the labour force, and others pushing for a future hiking policy in order to head off potential inflationary forces.  The former held sway, especially given that concerns over the labour market were already growing even before the outcome was to keep rates on hold, while it appears that some participants wanted a change in the reports of Committee contributions in order to show both sides of the argument, the possibility of raising rates if inflation was persistently above target. “The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective” and “a couple of … participants highlighted that, in their projection for the appropriate path of the policy rate, they had pushed their assessment of the most likely timing of rate cuts further into the future in light of recent readings on inflation.

Only one dissenting vote this time; Stephen Miran as usual, who is the strongest advocate on the Committee with respect to looser policy.  Chris Waller, who was the other voter for a cut at the January meeting, has swung to the centre.

As I am on the road I have turned to AI for detailed review, below.

1. Economic Staff Assessment

Labour Market

• Current conditions:
  • Unemployment rate at 4.4% in February, unchanged since September 2025.
  • Job gains low, partly distorted by a healthcare strike and harsh winter weather (staff expects payback in March).
  • Wage pressures cooling gradually:
    • Employment Cost Index: +3.4% YoY (Dec)
    • Average hourly earnings: +3.8% YoY (Feb), slightly below year‑earlier pace.
• Outlook:
  • Staff expect unemployment to remain near current levels through most of next year, then edge down toward the natural rate.
  • Risks to employment and GDP tilted to the downside, especially given elevated uncertainty and AI adoption risks.

Inflation

• Current readings:
  • Headline PCE inflation 2.8% YoY (Jan); core PCE 3.1% YoY.
  • February estimates slightly lower for core (~3.0%) but still elevated.
  • Core goods inflation picked up, largely due to tariffs.
  • Core services disinflation driven mainly by housing; non‑housing services inflation sticky.fomcminutes20260318
• Outlook:
  • Staff mark up near‑term inflation due to energy prices linked to Middle East developments.
  • Inflation expected to return close to 2% by end‑2027, assuming tariff and oil effects fade.
  • Risks to inflation skewed moderately to the upside, particularly if oil prices stay elevated.

Middle East / Iran (Staff framing)

• Staff explicitly note elevated forecast uncertainty from the conflict in the Middle East.
• Baseline assumes only modest and temporary macro effects, but highlights risk of:
  • Higher energy prices
  • Inflation persistence
  • Weaker global growthfomcminutes20260318

2. Committee Participants’ Views

Labour Market

• Current assessment:
  • Most participants judge the labour market as “broadly in balance”:
    • Low job growth seen consistent with slower labour force growth.
  • Some note temporary weakness from February strike and weather effects.fomcminutes20260318
• Emerging concerns:
  • Several participants highlight signs of softening, including:
    • Slight rise in prime‑age unemployment
    • Job growth concentrated in healthcare and a few sectors
    • Declining survey measures of job availability
  • Business contacts show greater caution in hiring, partly due to AI uncertainty.
• Risks:
  • Vast majority see downside risks to employment.
  • Low hiring environment makes unemployment vulnerable to shocks.
  • Prolonged Middle East conflict could further depress hiring sentiment.

Inflation

• Current assessment:
  • Participants agree inflation remains above the 2% target.
  • Some stress lack of recent progress on disinflation.
  • Tariffs keeping core goods inflation elevated.
  • Non‑housing core services inflation still too high relative to pre‑pandemic norms.
• Expectations:
  • Long‑run inflation expectations largely well anchored.
  • Near‑term inflation expectations have risen sharply, reflecting oil prices.fomcminutes20260318
• Risks from Middle East:
  • Participants emphasise that a prolonged conflict (including Iran‑related escalation risks implicitly) could:
    • Keep oil prices high
    • Lead to pass‑through into core inflation
    • Increase risk that expectations become more sensitive to energy shocks
• Bottom line:
  • Majority believe inflation risks are now higher than in January, and progress to target may be slower.
  • 3. Interest Rates & Policy Debate

Policy Decision

• Target range maintained at 3½–3¾%.
• Almost all participants supported holding rates steady.

Rationale

• Policy rate seen as around neutral after 75 bp of cuts in H2 2025.
• Holding steady keeps the Committee nimble given uncertainty.
• Too early to assess full economic impact of Middle East developments.

Forward Guidance / Reaction Function

• Many participants expect rate cuts eventually, conditional on inflation declining.
• Some have pushed expected timing of cuts further out, reflecting inflation data.
• Importantly, several participants explicitly argue for a two‑sided reaction function:
  • Cuts if labour market weakens materially
  • Hikes possible if inflation remains persistently above target

Market Context (from Desk)

• Markets shifted to fewer and later cuts; non‑zero probability of hikes (~30%).
• Oil shock drove up near‑term inflation pricing, but longer‑term inflation compensation remains stable.

4. Voting Breakdown

• Vote:
  • 11–1 in favour of holding rates.
• Dissent:
  • Stephen I. Miran voted to cut rates by 25 bp, citing:
    • Policy still restrictive
    • Weak labour demand
    • Elevated downside risks to employment
• Board of Governors unanimously kept:
  • IORB at 3.65%
  • Primary credit rate at 3.75%fomcminutes20260318

5. Key Takeaways (Macro Angle)

• Labour market: Balance for now, but asymmetric downside risks dominate the discussion.
• Inflation: Core progress stalled; energy + tariffs seen as meaningful upside risks.
• Middle East / Iran risk: Treated as a major uncertainty amplifier, especially via oil and expectations.
• Policy stance: Neutral, patient, explicitly two‑sided for the first time in tone.
• Bias: Not a near‑term cut signal; Committee is defending optionality.

Below is an explicit hawk–dove mapping of FOMC participants based only on statements, votes, and revealed preferences in the March 17–18, 2026 minutes. Where the minutes do not attribute a view to a named individual, I classify only when the text is sufficiently explicit; otherwise I mark “centre / data‑dependent” rather than over‑infer. All characterisations are grounded in the minutes text.

How to read the map

• Hawk: Emphasises inflation persistence, openness to hikes, caution on cuts
• Lean hawk: Recognises downside risks but stresses inflation risks / slower cuts
• Centre / balanced: Two‑sided reaction function, wait‑and‑see, data‑dependent
• Lean dove: Focus on labour‑market downside risks; earlier cuts conditional
• Dove: Explicit preference for near‑term easing

Explicit Hawk–Dove Spectrum (March 2026)

🕊️ Dove

Stephen I. Miran

• Action: Sole dissenter; voted to cut rates 25 bp at this meeting.
• Rationale: Current stance still restrictive; weak labour demand; elevated downside risks to employment.
  ➡ Clear, revealed dovish preference

🟢 Lean Doves

(No additional participants explicitly named as favouring a cut now)

• The minutes do not identify any other named participants advocating an immediate cut.
  ➡ Classification intentionally left empty to avoid inference

⚪ Centre / Balanced (Two‑Sided Reaction Function)

Jerome H. Powell (Chair)
John C. Williams (Vice Chair)
Philip N. Jefferson
Lisa D. Cook
Neel Kashkari
Lorie K. Logan
Christopher J. Waller
Michelle W. Bowman
Michael S. Barr
Beth M. Hammack
Anna Paulson

• Shared stance:
  • Strong support for holding rates steady.
  • Policy seen as around neutral after 75 bp of easing in H2 2025.
  • Repeated emphasis that policy is not on a preset course and must respond to data.
  • Explicit acknowledgement of both downside risks to employment and upside risks to inflation.
    ➡ Balanced core of the Committeefomcminutes20260318

Important nuance: several of these participants explicitly support a two‑sided description of future policy—cuts if labour weakens, hikes if inflation stays elevated—but without committing to either now.

🟠 Lean Hawks

(Subset of the centre with a clear inflation‑risk tilt)

Christopher J. Waller
Michelle W. Bowman
Lorie K. Logan

• Textual signals:
  • Support for explicitly acknowledging that rate increases could be appropriate if inflation fails to converge to 2%.
  • Heightened concern about energy‑driven inflation persistence and pass‑through risks from a prolonged Middle East conflict.
  • Stress that progress on inflation has been slower than expected.
    ➡ Not calling for hikes now, but clearly guarding the inflation flank

🔴 Hawks

(No participant explicitly advocating an immediate hike)

• While some participants discussed the risk case for future hikes, none voted for or proposed tightening at this meeting.

Key Interpretation (Macro‑relevant)

• Committee centre of gravity: Broadly centrist, with strong emphasis on optionality.
• Asymmetry: One clear dove vs multiple participants actively defending the possibility of hikes if inflation persistence materialises.
• Middle East / Iran risk: Acts as a hawkish tail risk, not a base‑case pivot.
• Net signal: This is not a pre‑cut Committee; it is a risk‑management Committee guarding inflation credibility while monitoring labour downside risks

Participant‑by‑Participant Rationale

🕊️ Cuts First

Stephen I. Miran

• Only dissent: explicitly voted for a 25 bp cut at this meeting.
• Clear focus on restrictive stance and labour‑market downside risks. ➡ Unambiguously first mover toward easing

🟢 Early Lean‑Cut Camp (But Not Immediate)

Neel Kashkari

• Emphasised downside labour‑market risks and low hiring environment.
• Did not dissent, but rhetoric aligns with cutting if labour softening accelerates. ➡ Would move quickly after Miran if employment deteriorates.
• Lisa D. Cook

• Strong focus on employment mandate and labour vulnerability.
• No overt inflation‑hawk language in the minutes. ➡ Likely supportive of earlier cuts conditional on jobs data.

⚪ Centre Core (True Two‑Sided Reaction Function)

Jerome H. Powell

• Explicitly balanced framing: elevated inflation and elevated employment risks.
• Repeated insistence on data‑dependence and optionality. ➡ Will not move first; likely moves with the Committee consensus.

 

Philip N. Jefferson

• Consistent with Chair’s balanced approach.
• No clear tilt toward either early cuts or hikes. John C. Williams

• Emphasised uncertainty and neutrality of current stance.

• Comfort with waiting for clearer inflation confirmation. ➡ These three define the median voter.

🟠 Early Lean‑Hike Camp (If Inflation Persists)

Christopher J. Waller

• Explicit support for stating that rate hikes could be appropriate if inflation remains above target.
• Concerned about persistence from energy and tariffs. ➡ First among those willing to re‑tighten if inflation stalls.

Michelle W. Bowman

• Similar inflation‑credibility emphasis.
• Comfortable keeping option of hikes clearly on the table.
• Lorie K. Logan

• Focus on financial conditions and inflation pass‑through risk.
• Alert to oil‑price driven persistence. ➡ Most sensitive to inflation‑expectations slippage.

Key Macro Interpretation

1. Asymmetry is real

• Only one outright dove, but multiple participants actively stress the hike tail‑risk.
• This skews the reaction function slightly hawkish relative to market pricing.

2. Middle East / Iran risk is pivotal

• Energy‑price persistence is the bridge variable:
  • Sustained oil shock → Logan / Waller / Bowman move first.
  • Labour hit without inflation persistence → Miran → Kashkari / Cook.

3. Median voter = Powell–Jefferson–Williams

• Policy only shifts decisively when data forces the centre, not from the wings.