Opinion with Peter Hug
Fed Less Hawkish In Our View
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Featuring views and opinions written by market professionals, not staff journalists.
(Kitco News) - The Federal Reserve acted in line with our expectations, leaving rates unchanged and suggesting a less hawkish outlook. The wording surrounding the Fed’s inflation target was the focus. The Fed officials’ dialogue suggested that inflation targets were nearing their levels but as long as inflation was around 2% on a “symmetrical” basis, they would continue to raise rates in a gradual format. The word symmetrical suggested that the Fed may allow inflation to exceed it’s target, as long as the overall average held around 2%. Issues with world trade, geopolitical risks with Iran and North Korea and the weakness (volatility) in equities were probably all factors in the Fed’s less hawkish tone. The next “news” event is tomorrow’s employment numbers, which if they come in under 160,000, should also confirm that the Fed is likely to pull back. The markets have priced in three to four rate increases this year and we continue to argue that unless the economy begins to show increased signs of growth, which is currently not the case, these forecasts are aggressive. Unless we get a surprise in the number tomorrow, i.e. job growth north of 220,000, the bottom, in the short-term, has been seen in gold. We would change to a bearish posture on a close below $1,305.