Federal Reserve policymakers were concerned about high energy prices contributing to inflationary pressures in the economy when they held interest rates steady last month, the minutes from the meeting show. The Federal Open Market Committee (FOMC), the Fed panel responsible for monetary policy decisions, released the minutes of policymakers' April meeting on Wednesday which showed inflation driven by energy prices and tariffs when they kept the benchmark federal funds rate unchanged at a range of 3.5% to 3.75%. The minutes indicated that the personal consumption expenditures (PCE) index, the Fed's preferred inflation gauge, was estimated at 3.5% in March. That's well above the Fed's 2% inflation target and jumped from 2.8% in February as the Iran war disrupted energy supplies from the Middle East. "Almost all participants noted that there was a risk that the conflict in the Middle East could persist for an extended period or that, even after the conflict ended, the prices of oil and other commodities could remain elevated for longer than expected," the minutes explained. "In such scenarios, these participants expected continued upward pressure on inflation arising from supply chain disruptions, high energy prices, or the pass-through of higher input costs to other prices," the FOMC continued. "The vast majority of participants noted an increased risk that inflation would take longer to return to the Committee's 2% objective than they had previously expected," the minutes said. Policymakers anticipated that high energy prices will continue to put upward pressure on inflation in the near term, while tariff-induced inflation is expected to diminish this year unless tariff rates rise above their current levels. Oil prices have hovered around or above the $100 per barrel range after trading closer to $70 a barrel before the Iran war. Meanwhile, gas prices have surged over 43% year over year to an average of $4.55 a gallon as of Wednesday, according to AAA data. Concerns that persistently high oil and gas prices may continue to push inflation higher and contribute to an uptick in inflation for other goods due to transportation costs weighed on the outlook for interest rate cuts. The Fed's April policy meeting included a dissent from three FOMC members – Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan – who opposed the inclusion of language they felt showed a bias toward easing interest rates.
