The minutes, released on Wednesday, said that the Fed could keep its benchmark interest rate unchanged if inflation remained stubbornly elevated.
Moreover, policymakers noted that the rate could be cut if growth slowed and unemployment rose. The minutes were for the Fed's 18-19 March meeting.
However, if both happened at the same time, the Fed "may face difficult tradeoffs," some of the 19 officials on the central bank's interest-rate setting committee said. Rising unemployment can often lead to a recession, when the Fed would normally slash its key rate to support more borrowing and spending and stimulate the economy.
Yet Fed officials would likely be reluctant to cut if inflation rose because it usually seeks to cool higher prices by keeping its key rate unchanged — or even raising it if necessary.
The minutes reflect discussions among Fed officials before President Donald Trump announced sweeping tariffs on April 2 for nearly 60 countries, along with a 10% tariff on nearly all nations. Trump said on Wednesday that he had paused the tariffs for 90 days, though the 10% duty would remain, as well as a huge 125% tax on imports from China.
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The minutes also said that the tariffs had been announced prior to the March meeting — on steel, aluminum, and on many imports from Canada and Mexico — and had already caused many companies to delay hiring and raise prices.
Several Fed officials, according to the minutes, said that their business contacts "were already reporting increases in costs, possibly in anticipation of rising tariffs," or "had indicated willingness to pass on to consumers higher input costs that would arise from potential tariff increases."
Furthermore, "high uncertainty had the potential to damp consumer spending as well as business hiring and investment activities."
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In remarks last Friday, Fed Chair Jerome Powell said the tariffs announced on 2 April would likely raise inflation and slow growth. He also noted that their impact would likely be temporary but said there was a heightened chance that they could persistently raise inflation.
Inflation has come down sharply from its peak in June 2022, but it has remained stubbornly elevated even before the imposition of duties. Consumer prices were 2.8% higher in February compared to a year ago, though March figures will be released early Thursday and are expected to show inflation declining to 2.6%.
The next monetary policy meeting of the Federal Open Market Committee is scheduled to take place 6-7 May.