Gold price (XAU/USD) continues to attract bids ahead of the Federal Reserve (Fed) interest rate decision, which will be announced on Wednesday. The ye
Investors remain curious about the guidance on interest rates as a hawkish outlook would trigger a risk-aversion theme. Markets are pricing in that the Fed is done with hikinguntil year-end, and hopes for the US economy shifting on a “golden path” are high. The only factor that could keep expectations of one more interest rate increase is rising energy prices, which may contribute to inflation and further squeeze households’ real incomes.
The recent rise in Oil prices is exerting pressure on inflation but Fed policymakers generally consider core inflation, which doesn’t include energy prices, while framing monetary policy. Any discussion about rate cuts would improve the appeal for the risk-perceived assets and dampen the US Dollar. Economists at Goldman Sachs expect Fed officials to signal a full percentage point of cuts next year but to keep expectations of one more interest rate increase this year to a range of 5.50%-5.75%.
About the US economic outlook, US Treasury Secretary Janet Yellen on Monday said that she doesn’t see any signs that the economy will enter into a downturn as inflation is coming down and the labor market is quite strong. The US Dollar Index seems well-supported above the crucial 105.00 level. Investors keep pumping money into the USD Index due to deepening fears of a global slowdown in a high-interest rate environment.price resumes its three-day winning spell as the Fed is expected to keep the monetary policy unchanged on Wednesday. The precious metal is at a two-week high at around $1,935.00 after discovering buying interest near the 200-day Exponential Moving Average , which trades at around $1,910.00.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing . QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
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