Due to high uncertainty about the net effect of an array of government policies on the economic outlook, the minutes of the Federal Reserve's latest monetary policy revealed officials believe it remains appropriate to take a "cautious approach" to future interest rate decisions.
The minutes also reiterated recent comments from Fed Chair Jerome Powell calling the central bank "well positioned" to wait for more clarity on the outlook for inflation and economic activity.
"A restrictive policy could be maintained for longer if inflation were to remain elevated, and policy could be eased if labor market conditions were to deteriorate or economic activity were to weaken," the minutes said.
The Fed added, "Some participants observed, however, that the Committee may face difficult tradeoffs if inflation proved to be more persistent while the outlook for growth and employment weakened."
Notably, the Fed's March 18-19 meeting, when the central bank decided to once again leave rates unchanged, took place weeks before President Donald Trump's announcement of "reciprocal tariffs" on U.S. trade partners.
The Fed said a majority of participants noted the potential for inflationary effects arising from various factors, including Trump's tariffs, to be more persistent than they projected.
The minutes highlighted increased uncertainty around the economic outlook, noting all participants viewed risks to inflation as tilted to the upside and risks to employment as tilted to the downside.
The Fed's next monetary policy meeting is scheduled for May 6-7.