(Kitco News) – Gold prices are under pressure, but hold critical support above $ 1,500 an ounce as the Federal Reserve cuts interest rates, but strikes a fairly neutral tone on the US economy and a cracked central bank.
a strong expected move Wednesday, the US central bank cut interest rates by 25 basis points, and lowered the yield band to between 1.75% and 2.00%.
Gold prices held modest gains ahead of the central bank's monetary policy decision and have lost no ground for less dovish than expected sentiment. Gold futures in December last traded for $ 507.60 ounces, down 0.34% on the day.
In its monetary policy statement, the central bank noted that economic activity increased at "a moderate pace." Bank is still optimistic that the economy will continue to see positive growth in a low interest rate environment.
"This action supports the Committee's view that sustained expansion of economic activity, strong labor market conditions and inflation close to the Committee's symmetrical 2 percent target are the most likely outcomes, but the outlook remains uncertain," the central bank said.
Despite market expectations, recent central bank projections, also known as dot plots, show that committee members do not expect to see further rates cut through 2020.
According to some economists, gold prices may find modest support, as future monetary policy is not clear. The last poll saw three dissents, the first in three years.
Two dissents would not lower the interest rate at this meeting, and one voter wanted a 50-point move. According to the reports, only seven 0 out of 1
Avery Shenfeld, senior economist at CIBC, said that the latest comments from the US central bank are a bit on the hawkish side. However, he added that there could be another interest rate cut this year.
"There were no meaningful changes in growth or inflation forecasts, but it is clear that there is still a lot of uncertainty around that path, and in political assumptions about trade, etc. that come with it," he said. to our call for one more cut this year, and then a break through 2020. "
The following is an overview of the Federal Reserve's financial projections.
In recent interest rate forecasts, known as the dot plot, the central bank's median forecast for interest rates is around 2.9% this year and next, down from the June forecast of 2.4%. In the long term, the central bank looks at rates of 2.1%, in 2021, down from the previous forecast of 2.4% For 2020, the central bank sees interest rates at 2.4%.
Looking at growth, the Federal Reserve expects US gross domestic product to grow by 2.2% in 2019, up from June estimates. Economic activity is expected to grow 2.0% in 2020, unchanged from June one is expected to grow 1.9% in 2020, up from the previous estimate of 1.8%. In the first glance for 2022, central banks expect growth of 1.8%.
The Committee sees a relatively stable labor market over the next few years, as unemployment is expected to hover around 3.7% this year and next, relatively unchanged from the June projections. Unemployment is projected to rise to 3.8% in 2021, and 3.9% by 2022.
Despite sustained weak inflationary pressures over the past year, the US central bank continues to expect price pressure to continue to build. Estimates show that inflation will rise by 1.5% this year, rising 1.9% next year and hitting 2% in 2021 and 2022.
Core inflation expectations, which strip volatile food and energy prices, are expected to push to 1.8 % this
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