“The Fact is the Committee is Not Thinking About Rate Cuts Right Now at All. We’re Not Talking About Rate Cuts” – J. Powell

Federal Reserve Maintains Benchmark Interest Rates Amid Inflation Fight

As anticipated, Federal Reserve members unanimously voted to maintain its benchmark Fed funds rate at its current level between 5 ¼% and 5 ½% for the second consecutive FOMC meeting. This second rate hike pause occurred after the Fed implemented 11 consecutive rate hikes beginning in March 2022.

Today’s statement combined with Chairman Powell’s press conference contained additional insight into the thought process behind expectations of the Federal Reserve moving forward.

In his remarks, Chairman Powell underscored the Federal Reserve’s continued commitment and resolve to achieve its goal of reducing inflation to 2%. He added that “the process of getting inflation sustainably down to 2% has a long way to go”.

Addressing the Federal Reserve’s upcoming changes to their monetary policy the released statement made it clear that the committee is still in the process of, “determining the extent of additional policy firming” that may be needed to achieve its dual mandate. The statement also addressed the need for flexibility saying, “The Committee will continue to assess additional information and its implications for monetary policy.”

The Fed’s monetary policy suggesting that elevated rates will remain, “higher for longer” continues to be its central theme. As long as the Federal Reserve has its focus on inflation reduction Chairman Powell has been adamant that they are not even thinking, or talking about rate cuts at this moment.

Given that the Federal Reserve did not raise rates today, Chairman Powell stressed that the restrictive monetary policy currently in place will continue until the data says it should not. He reaffirmed that the Fed has and continues to significantly tighten its stance on monetary policy, as seen through multiple interest rate hikes in conjunction with their reduction of security holdings. He also made it clear that the full effects of policies have yet to be felt.

Gold Reaction to Federal Reserve Meeting

This certainly created bearish pressure, taking gold prices lower. As of 6 PM EDT, gold futures basis most active December contract is currently $6.80, or 0.34% lower, and fixed at $1987.50. Before the meeting gold briefly traded to $2005.90 the high of the day. Trading has just resumed in Australia through Globex with gold slightly higher than the New York close and fixed at $1991.70.

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Wishing you as always good trading,

Gary S. Wagner