(Kitco Commentary) - One of the most memorable lines in cinema was delivered by Jim Carrey, arguably one of the greatest comic minds of this century, in the 1994 film "Dumb and Dumber." When his character Lloyd Christmas professes his love to Mary Swanson (Lauren Holly) and she responds that his chances are "one in a million," he famously replies: "So, you're telling me there's a chance?"
This quote — often invoked humorously when hoping against astronomical odds — perfectly encapsulates the current sentiment surrounding tomorrow's Federal Open Market Committee (FOMC) meeting. According to the CME's FedWatch tool, there's merely a 1% probability that the Federal Reserve will announce a 25-basis point rate cut. Yet, as Lloyd Christmas might say, that's still a chance.
The Consensus View: Hold Steady
Benzinga reports that "The Federal Reserve is set to hold interest rates steady on Wednesday, reinforcing its 'not-in-a-hurry' stance on rate cuts while possibly raising inflation forecasts to account for the economic impact of new trade tariffs."
Tomorrow's FOMC meeting will release updated economic projections in the Summary of Economic Projections (SEP), including forecasts for growth, inflation, employment, and the interest rate path—commonly referred to as the "dot plot."
The last SEP from December 2024 indicated the Fed anticipated cutting interest rates twice in 2025, each time by 25 basis points. This projection is considerably more hawkish than current market expectations. The CME's FedWatch tool suggests a 42% probability that the Fed will implement at least two 25-basis point rate cuts this year.
The Trump Tariff Factor
Federal Reserve officials now face a new economic landscape. President Trump has implemented tariffs that have already taken effect, with indications of more substantial tariffs to come. This development demands a recalibration of economic projections.
This leads to my admittedly speculative hypothesis: the Fed could, in fact, cut rates tomorrow. Since they already plan two cuts this year, why not act preemptively to mitigate the potential damage from Trump's tariffs? These trade actions could trigger a contraction in the global economy. By cutting rates sooner rather than later, the Fed could proactively address the economic fallout many analysts anticipate.
A Strategic Preemptive Move?
While it remains a long shot—a probability so low it hardly warrants serious consideration—it's plausible that the Fed might revise its timing strategy regarding rate cuts. They could initiate cuts earlier than previously considered, especially given Trump's new tariffs on China, Canada, and Mexico, plus his plans to implement duties on European Union imports and on countries exporting steel and aluminum to the United States.
I expect significant criticism for proposing this scenario. I'm among one of the first to acknowledge that a rate cut would be utterly unexpected. Furthermore, because President Trump has explicitly demanded rate cuts, it seems even less likely that Federal Reserve officials would want to appear responsive to presidential pressure.
Yet, while a Fed rate cut tomorrow would be a surprise and completely unexpected; it's not impossible. It might actually represent the perfect strategic response to get ahead of potential inflationary pressures due to tariffs while providing a much-needed boost to a declining global economy.
Gold's Steady Rise
Against this backdrop of economic uncertainty, gold prices continue their impressive upward trajectory, approaching a parabolic curve. The most active April futures contract is currently fixed at $3,041.70, reflecting today's increase of $31.60—a daily gain of 1.05 percent.
As we await tomorrow's announcement, we're left with that sliver of possibility—that one-in-a-million chance that, as Lloyd Christmas would eagerly point out, is still a chance.
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