The Minutes from the Federal Reserve’s (Fed) March meeting, released on Wednesday, reinforce the idea that the Fed is firmly in wait-and-see mode, but with a growing recognition that risks are becoming more balanced.

Policymakers broadly agreed that holding rates steady was the right call, with almost all participants backing no change in March. At the same time, many saw policy already sitting within a plausible range of neutral, suggesting the bar for further tightening remains relatively high.

The Fed is increasingly framing its reaction function as two-sided. On one hand, many officials still expect that rates can be lowered if inflation continues to ease as projected. But that confidence is far from unconditional.

A number of policymakers are already pushing back the timing of potential rate cuts, reflecting lingering concerns that inflation could prove more persistent than expected. In fact, a large majority flagged the risk that price pressures could stay elevated for longer, particularly if higher Oil prices feed through more broadly.

At the same time, the growth outlook has softened slightly compared to earlier in the year, and the Fed is clearly paying closer attention to downside risks in the labour market. Some participants warned that a prolonged geopolitical shock could weigh on hiring and potentially justify rate cuts.

Uncertainty around the Middle East remains a key variable. Most officials acknowledged that it is still too early to assess the full economic impact, but risks are seen as rising on both sides of the mandate.

All in all

The Fed is holding its ground, but the narrative is evolving.

Rates are likely to stay higher for longer, but the Committee is now openly acknowledging that the path forward could go either way.

The bar for cuts remains high, but the Fed is no longer ruling out a shift if growth starts to crack.

Market reaction

The Greenback remains on the back foot, although it has managed to bounce off earlier lows. That said, the US Dollar Index (DXY) hovers around the 99.00 level following a drop toward its critical 200-day SMA near 98.50. Lower US Treasury yields also accompany the daily pullback in the Greenback as investors continue to assess the two-week US-Iran ceasefire.

This section below was published as a preview of the FOMC Minutes of the March 17-18 meeting at 13:15 GMT.

• The Minutes of the Fed’s March 17-18 meeting are due on Wednesday.
• Investors are expected to closely follow details of the latest hawkish hold.
• Markets see one or no interest rate cut this year. 

The Federal Reserve (Fed) will publish its Minutes from the March 18 meeting on Wednesday. The release should be less about the decision itself and more about the officials’ “no rush to cut” narrative.

Let’s recall that the Fed matched consensus last month, leaving its Fed Funds Target Range (FFTR) unchanged at 3.50%-3.75%, although both the statement and the subsequent Chair Jerome Powell’s press conference showed a subtly hawkish tilt.

Indeed, economic growth looks healthy; the labour market appears somewhat cooling, albeit slower than many policymakers would prefer; and inflation continues to run hot… hotter, actually. And prospects for inflation are far from rosy. Indeed, allow us to forget about tariffs for a moment. The ongoing surge in crude oil prices in response to the Middle East war and its impact on refined products should catapult the energy component of inflation even further, eventually reinforcing the views of those who advocate a “tighter-for-longer” policy.

The updated Summary of Economic Projections (SEP) showed a higher inflation path into 2026 and a slightly higher longer-run rate, all advocating for a policy stance that may need to stay restrictive for longer than previously assumed.

That said, the Minutes should shed some light on how broad that view holds inside the Committee. If we look at the fresh dot plot, they still reveal a meaningful split, with some officials saying there won't be any rate reductions this year and one rate setter even hinting at a potential rate hike in 2027. On this, market participants will be closely watching whether it is a real change in the centre of gravity or simply a few more hawkish opinions.

At his usual press conference, Chair Jerome Powell said that the Fed isn't ready to disregard current price pressures without further confirmation of a return to some disinflationary pressure, particularly when it comes to goods costs. Powell also stressed that further tightening is not the basic scenario, implying that policy is in a two-sided but clearly unequal stance, with the bar for staying on hold much higher than the bar for lowering.

What to watch in the Minutes

There will probably be three main areas of attention.

First, how worried policymakers are about inflation being high, particularly if they regard shocks connected to energy and tariffs as transient or more permanent.

Second, how confident people are that the process of disinflation will work. Any phrase that calls into question the disinflation of products or the inflation of services that remain around would support the idea that rates would stay higher for longer.

Third, the balance of risks within the Committee. If the Minutes demonstrate that members are much more anxious about inflation than growth, it would back up what Powell said about the imbalance.

When will the FOMC Minutes be released, and how could they affect the US Dollar?

The FOMC will release the Minutes of the March 17-18 policy meeting at 18:00 GMT on Wednesday. 

FX takeaway

The Minutes probably won't alter the game for the US Dollar (USD) unless their tone emerges as really surprising. A generally hawkish assessment that confirms patience and a limited desire for cuts should keep US Treasury yields stable and the Greenback propped up.

In contrast, the US Dollar would be in danger if there were any signs that more members were worried about the threats to growth or the job environment. If that doesn't happen, the basic assumption is still that the Fed will continue in ’wait-and-see’ mode, and policy will stay tight for longer than the markets would want.

All in all

The Minutes should reinforce the idea that the Fed is not just pausing; it is deliberately holding its ground. Unless there is a clear shift towards growth concerns, the message remains unchanged, rates stay higher for longer, and the bar for cuts remains firmly elevated.