Janet Yellen set the bar with her dovish comments last week, but the minutes from March’s didn’t stray too far. While it was acknowledged that domestic data had been decent and the recent softness in retail sales comes amidst a wider strengthening in consumption, the overall tone of the release exhibited increased concern about global risks including the financial market turbulence experienced earlier in the year.
Participants generally saw global economic and financial market developments as positing a risk to the domestic economy. The publication noted that “many” participants believed that those global risks and the asymmetric ability of monetary policy to respond warranted caution in tightening policy. Participants also saw economic developments tilted to the downside and, with inflation expectations falling, policy tightening needed to be delayed.
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Overall, there are still those on the committee that believe inflation is returning to target and policy tightening is warranted, but the asymmetric nature of policy options at the effective lower bound and global conditions has led a majority to believe proceeding cautiously is most prudent. That made this one of the more dovish Fed minutes.
