Synopsis:

Ahead of Wednesday’s release of the March FOMC meeting minutes, BofA and Morgan Stanley suggest that investors should focus on how the Fed is preparing for a more stagflationary environment—especially in light of the recent escalation in US trade policy.

Key Points:

• BofA:
  • The Fed acknowledged stagflation risks during the March meeting, even before the latest tariff announcements.
  • Investors should watch closely for any insight into how the Fed might respond to a stagflationary scenario—i.e., weaker growth coupled with higher inflation.
  • BofA notes that economic conditions may already be worse than what was contemplated during the meeting.

• Morgan Stanley:
  • While the minutes could shed light on the Fed’s thinking about tariffs, they are likely outdated relative to more recent developments.
  • The market is expected to place greater weight on Chair Powell’s April 4 speech, which may provide more up-to-date guidance on how the Fed sees current risks.

Conclusion:

The March FOMC minutes may offer important context around the Fed’s evolving reaction function, especially amid rising stagflation concerns. However, with policy and data rapidly shifting—particularly post-tariffs—Chair Powell’s upcoming remarks could carry more market-moving potential.