The minutes from the Fed’s March meeting showed they believe there will be “a mild recession starting later this year, with a recovery over the subsequent two years.” The Fed also said they thought the recent banking crisis will result in a pullback in bank lending, which would have its own tightening effect on the economy.

On that note, several members considered forgoing a rate hike in March because of the banking turmoil but ultimately judged inflation to be too significant. Some members even noted they would have considered a 50 basis point hike to the Fed Funds Rate if there wasn't any stress in the banking sector.

What’s the bottom line? The Fed has hiked the Fed Funds Rate nine times since March of last year, bringing it to a range of 4.75% to 5%. The Fed Funds Rate is the interest rate for overnight borrowing for banks and it is not the same as mortgage rates. When the Fed hikes the Fed Funds Rate, they are trying to slow the economy and curb inflation, which continues to ease per the latest CPI and PPI reports as noted above.

The Fed minutes also showed that they expect the Fed Funds Rate to reach a peak in May, which sounds like potentially one more 25 basis point hike at their May 2-3 meeting. The problem is that the Fed continues to look at lagging data instead of seeing the progress already made, even though the economy is showing signs of cracks and inflation is coming down.