FOMC minutes, April 9, 2026: rate hikes are back on the table as the “vast majority” of Fed officials warn inflation is running persistently above target

NEW YORK, April 10, 2026. The Federal Reserve released the minutes of its March 17–18 FOMC meeting on Wednesday — and the document contained the clearest single articulation of how profoundly the Iran war has shifted the central bank’s internal policy calculus. The headline phrase, drawn from the committee’s Participants’ Views section: “The vast majority of participants noted that progress toward the Committee’s 2 percent objective could be slower than previously expected and judged that the risk of inflation running persistently above the Committee’s objective had increased.” In FOMC language, “vast majority” is as close to consensus as the committee reaches outside of “all.” The minutes confirmed a second consecutive hold at 3.50–3.75%, but the internal posture is unambiguous: the committee is increasingly uncomfortable with the inflation trajectory, has abandoned its prior framing of one 2026 rate cut as the base case, and has explicitly opened the door to rate hikes if inflation does not decelerate materially. The reaction in markets was immediate — the VIX climbed to 26.15 after the Wednesday release, and Treasury yields surged.

What the minutes actually said — the key passages

The March minutes covered a meeting held on March 17–18 — approximately three weeks into the Iran war, when Brent crude was already approaching $110 per barrel and Hormuz throughput had collapsed from 138 vessels per day to approximately five. The economic conditions assessment reflected that context directly. Participants “generally observed that overall inflation remained above the Committee’s 2 percent longer-run goal,” and “some participants remarked that further progress in reducing inflation had been absent in recent months.” The conflict in the Middle East “resulted in sharp increases in energy prices, raised questions about the macroeconomic outlook, and caused a notable repricing in several asset classes” — the committee’s formal acknowledgement that the war’s economic transmission was already measurable at the meeting date.

The growth assessment was more sanguine, which is precisely what makes the hawkish inflation framing analytically significant. Participants generally viewed the economy as “expanding at a solid pace,” with “consumer spending resilient” and “business fixed investment robust, largely reflecting strength in the technology sector.” The labour market was characterised as “broadly in balance,” with the February payroll miss attributed primarily to the healthcare strike and weather — a temporary disruption that the committee correctly anticipated would reverse (and did, emphatically, with March’s +178,000 print). The committee’s concern is not a slowing economy requiring emergency cuts. It is an economy that is running adequately while simultaneously importing an energy-driven inflation shock that the Fed’s traditional demand-side tools cannot directly address. That combination — solid growth, rising inflation from a supply shock — is the stagflationary trap that the FOMC is most anxious to avoid allowing to become self-reinforcing.

Why the dot plot shift matters more than the headline vote

The March FOMC meeting produced a second consecutive hold — a vote the market had fully priced and that generated no surprise. The analytical weight is in the dot plot revision and its implications for the committee’s reaction function heading into the June and July meetings. In December 2025, when the Fed last updated its Summary of Economic Projections, participants pencilled in a median of one 25-basis-point cut in 2026. In March 2026, that median survived — barely — but the internal distribution shifted dramatically: seven of nineteen participants now project zero cuts in all of 2026, up from only a handful in December. More consequentially, the March dots show the first participant who is now projecting rate hikes. The longer-run neutral rate estimate moved up to 3.125%, a signal that policymakers are reassessing whether the 3.50–3.75% current rate is as restrictive as previously assumed in a higher-inflation environment.

The practical implication of that distribution shift is that the committee’s internal debate has structurally changed character. Prior to the Iran war, the question at each meeting was “how soon do we cut?” — a debate about pace of easing in a decelerating inflation environment. The March minutes confirm that the question has shifted to “do we hold, cut, or hike?” — a three-way debate with material probability mass on all three outcomes depending on the trajectory of inflation expectations and the durability of the ceasefire. Fed Chair Jerome Powell, whose term expires on May 15, must navigate the committee’s next meeting on April 28–29 in what may be his final FOMC session. Kevin Warsh — Trump’s nominated successor — has publicly expressed views more tolerant of inflation fighting through rate hikes. The institutional transition adds an additional layer of uncertainty to how the committee’s hawkish minority language will be interpreted by markets heading into the post-Powell era. For a framework on how Fed leadership transitions historically affect equity markets, PreMarket Daily’s Fed guide provides context.

The Burns Mistake — why the FOMC is determined not to repeat 1971

Multiple FOMC participants, economists, and market analysts have explicitly invoked the “Burns Mistake” in the context of the 2026 Iran war inflation environment — a reference to Federal Reserve Chair Arthur Burns’ decision to cut rates prematurely in 1971–1972, believing post-Vietnam inflation was under control, only for a second and far more powerful inflation wave (driven by the 1973 OPEC oil embargo) to take hold and ultimately require Paul Volcker’s brutal 20%+ rate regime to extinguish. The parallel is instructive: in both 1971 and 2026, an energy supply shock coincided with a period where the Fed had been cutting rates and where inflation expectations were in the process of becoming unanchored. The risk is not that the Fed makes the Burns Mistake today — it is that by acting insufficiently or communicating too dovishly in response to a supply-side shock it cannot directly control, it allows the public’s expectation of future inflation to drift upward in a self-fulfilling cycle.

The March minutes’ “vast majority” language on persistent inflation risk is the institutional guard against that outcome: it signals to markets that the committee will not reflexively look through the energy spike the way it might in a peacetime supply shock of modest duration. Heather Long, chief economist at Navy Federal Credit Union, captured the positioning precisely: “The Federal Reserve is on a prolonged pause until the fog of war clears.” That framing — prolonged pause rather than pivot toward cuts — is explicitly supported by the minutes’ language, and it means the market’s September 2026 rate cut pricing (approximately 15% probability as of midday Wednesday) is the most that institutional consensus can currently support. If today’s March CPI comes in at or above consensus and the April data confirms a second month of hot prints, that 15% September probability would compress toward zero and the rate hike probability would begin accreting in a way that would fundamentally reprice the equity market’s valuation framework.

February PCE — the pre-war baseline that frames today’s CPI

The Bureau of Economic Analysis released February PCE on Thursday — the Fed’s preferred inflation gauge, delayed from its original schedule due to the partial government shutdown. February PCE rose +0.4% MoM, with consumer spending growing +0.5% nominally but only +0.1% in real (inflation-adjusted) terms. EY-Parthenon chief economist Greg Daco’s assessment was explicit: “Make no mistake, households are increasingly running on fumes.” The February PCE represents the pre-war baseline — it reflects the inflation environment before the first barrel of Hormuz-disrupted crude hit U.S. retail fuel prices. At +0.4% in February, the starting point for the Iran war’s inflation transmission is already elevated above the pace the Fed needs to see for sustainable disinflation. The March CPI landing today adds the first month of war-driven energy costs on top of that elevated starting point. If the March PCE (due April 30) shows a similar +0.4–0.5% MoM reading — possible given that PCE’s energy weight is somewhat lower than CPI’s but still material — the committee’s April 28–29 decision will be surrounded by two consecutive months of inflation running well above the annual pace consistent with the 2% target.

The tariff offset provides some relief in the overall inflation picture: the effective U.S. tariff rate has fallen from a 2025 peak of 21% to approximately 8%, per the Yale Budget Lab. That reduction removes one inflationary input while the war adds another — roughly a wash, but one that the Fed can point to as evidence that the inflation picture is not entirely moving in the wrong direction. The more significant long-run variable is whether the two-week ceasefire’s oil price relief reaches gasoline prices before the April survey closes. If WTI sustains below $95 through mid-April and retail gasoline falls meaningfully, the April CPI could print noticeably cooler than Oxford Economics’ above-4% forecast — providing the Fed with the first sequential deceleration data it needs to maintain its patient hold rather than tighten. Everything the Fed does between today’s meeting and April 28–29 will be conditioned on today’s CPI number as the first hard data confirmation of the war’s inflation pass-through. For the broader earnings season context — which starts in earnest next week with JPMorgan and major banks — the Fed’s policy trajectory will be the primary macro input shaping how analysts model forward earnings multiples across every sector.