Hawaii Six O - Gary Wagner
Fed to Stay the Course, At Least Until Next Week
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Today the Federal Reserve released its “Monetary Policy Report” to members of the Senate and House of Representatives. The summary indicated that the economy as well as the labor market continues to grow, and inflation remains below their long-term objective of 2%.
According to today’s report, “Economic activity increased at a solid pace over the second half of 2017, and the labor market continued to strengthen. Measured on a 12-month basis, inflation has remained below the Federal Open Market Committee’s (FOMC) longer-run objective of 2 percent.”
Economic growth was clearly visible in the GDP “Real gross domestic product (GDP) is reported to have increased at an annual rate of nearly 3 percent in the second half of 2017 after rising slightly more than 2 percent in the first half.”
The report also acknowledged that their current interest rate policy will remain accommodative with gradual increases to the target range for the Fed funds rate.
This rate which currently resides in a range of 1 ¼ to 1 ½ was raised twice during the first half of 2017 with a final hike in December.
“Even with this rate increase, the stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.”
The net result of today’s semiannual Monetary Policy Report was that in all likelihood the Federal Reserve will stay the course and implement three, not four interest rate hikes this year.
Next week’s testimony to Congress by Fed Chairman Powell could shed additional insight, however, it will be next month’s FOMC meeting when investors and traders will look at to see if the first-rate hike of 2018 is implemented.
At least for now, today’s report was a catalyst to the 347-point daily gain in the Dow Jones Industrial Average. It also muted any large moves in either the US dollar or gold. Gaining just over a 10th of a percent the US dollar index closed fractionally higher at 89.77, and gold futures closed at 1,331.20 down a $1.50 on the day.
Our technical studies indicate minor support at $1,317, which is the 38% retracement of the last rally, and $1,302 the 50% retracement. The first resistance level is $1,336, with major resistance at $1,360-65, the highest price point gold achieved during the most recent rally.
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Wishing you as always, good trading,