Main Topic: U.S. inflation and the Federal Reserve's efforts to control it.
Key Points:
1. U.S. inflation has declined for 12 straight months, but consumer prices increased 3% year-on-year in June.
2. The Federal Reserve aims to reduce inflation to about 2% and plans to raise its key federal funds rate to over 5%.
3. The Fed is concerned about high inflation due to a strong labor market, rising wages, and increased consumer spending, and aims to slow the job market to control inflation.
### Summary
Gold prices have continued to decline due to rising US treasury yields and a stronger dollar. The FOMC meeting minutes revealed concerns about inflation and the potential need for additional interest rate hikes. The outlook for gold prices remains subdued ahead of Federal Reserve Chair Jerome Powell's upcoming speech.
### Facts
- 📉 Gold prices have declined for the fourth consecutive week, breaking below the significant threshold of $1,900 per troy ounce and reaching their lowest point since March 2023.
- 📈 The continuous rise in US treasury yields and the dollar index has contributed to the decline in gold prices.
- 📊 US economic indicators, such as retail sales and manufacturing production, have outperformed expectations, highlighting resilient consumer spending and propelling the dollar index.
- 💸 The FOMC meeting minutes revealed concerns about inflation and the potential need for additional interest rate hikes, although two Fed officials favored keeping rates unchanged or pursuing a rate cut.
- 🇨🇳 Weakening sentiment in China and diverging monetary policies have also contributed to the strengthening dollar.
- 📆 The upcoming week will focus on flash manufacturing PMI figures and the Jackson Hole Economic Symposium, where Federal Reserve Chair Jerome Powell is scheduled to address the economic outlook.
### Potential Implications
- ⬇️ Gold prices are expected to remain subdued in anticipation of Powell's speech, as elevated yields and a stronger dollar continue to impact the market.
Gold and silver prices rise as the weaker U.S. dollar index and dip in U.S. Treasury yields attract futures traders and bargain hunters, while anxieties build over upcoming speeches from the Fed and ECB on future monetary policy direction and the potential shift in the Fed's inflation goal.
The Federal Reserve is losing its power to influence the US economy, according to Wall Street economist Richard Koo, potentially requiring higher interest rates to drive inflation down and leading to a selloff in stocks and bonds.
The latest inflation data suggests that price increases are cooling down, increasing the likelihood that the Federal Reserve will keep interest rates unchanged in their upcoming meeting.
Emerging-market central banks are resisting expectations of interest rate cuts, which is lowering the outlook for developing-nation bonds, as central banks in Asia and Latin America turn hawkish in response to the "higher-for-longer" stance taken by the Federal Reserve, currency pressures, and the threat of inflation.
The U.S. is currently experiencing a prolonged high inflation cycle that is causing significant damage to the purchasing power of the currency, and the recent lower inflation rate is misleading as it ignores the accumulated harm; in order to combat this cycle, the Federal Reserve needs to raise interest rates higher than the inflation rate and reverse its bond purchases.
Gold prices decline slightly as the dollar remains strong, with investors awaiting further signals on the U.S. Federal Reserve's monetary policy after an expected interest rate pause this month.
Inflation has decreased significantly in recent months, but the role of the Federal Reserve in this decline is questionable as there is little evidence to suggest that higher interest rates led to lower prices and curtailed demand or employment. Other factors such as falling energy prices and the healing of disrupted supply chains appear to have had a larger impact on slowing inflation.
The United States Federal Reserve's financial woes and potential implications for cryptocurrency are discussed on the latest episode of "Macro Markets," highlighting challenges posed by inflation and the consequences of loose monetary policies during the pandemic.
The Wall Street Journal reports a notable shift in the stance of Federal Reserve officials regarding interest rates, with some officials now seeing risks as more balanced due to easing inflation and a less overheated labor market, which could impact the timing of future rate hikes. In other news, consumer credit growth slows in July, China and Japan reduce holdings of U.S. Treasury securities to record lows, and Russia's annual inflation rate reached 5.2% in August 2023.
New research suggests that elevated interest rates may not have been the main cause of the decline in inflation, sparking a debate about whether the Federal Reserve needs to raise rates again.
Gold prices rose as the dollar weakened and investors awaited central bank policy meetings, with the Fed expected to pause on interest rate hikes.
The Federal Reserve faces the challenge of bringing down inflation to its target of 2 percent, with differing opinions on whether they will continue to raise interest rates or pause due to weakening economic indicators such as drops in mortgage rates and auto sales.
Wall Street fears that the Federal Reserve will push out the timing for rate cuts next year, sparking concerns of a hawkish pause and increasing selling pressure, despite a trend of rapid disinflation and the potential for a higher neutral interest rate.
The Federal Reserve is expected to keep interest rates unchanged as it faces economic and political risks while trying to combat inflation.
The dollar strengthens and stocks decline as the Federal Reserve delivers a "hawkish pause" during the Fed meeting, with updates on the interest-rate decision, dot plot, and Jerome Powell press conference.
The Federal Reserve has revised its interest rate forecast, planning for fewer rate cuts next year than previously anticipated, which may not be favorable for borrowers.
The Federal Reserve's measure of inflation is disconnected from market conditions, increasing the likelihood of a recession, according to Duke University finance professor Campbell Harvey. If the central bank continues to raise interest rates based on this flawed inflation gauge, the severity of the economic downturn could worsen.
The Federal Reserve's decision to hold interest rates and the possibility of rates remaining higher for longer may have triggered a sell-off in the US equities and cryptocurrency markets, with risk assets typically underperforming in a high-interest-rate environment.
Gold edges lower as investors react to U.S. Fed officials' warning of further interest rate hikes ahead of a consumer inflation gauge.
Despite predictions of higher unemployment and dire consequences, the Federal Reserve's rate hikes have succeeded in substantially slowing inflation without causing significant harm to the job market and economy.
The Federal Reserve's interest-rate forecast is more hawkish than anticipated, with policymakers expecting to hold their key rate a half-percent higher through 2024 and cutting the federal funds rate by just one quarter-point over the next 15 months due to the economy's recent unexpected strength, despite doubts from Wall Street and rising Treasury yields.
Financial markets are betting on more rate cuts next year than what Federal Reserve policymakers believe is likely, which may complicate the Fed's efforts to control inflation.
The Federal Reserve has upgraded its economic outlook, indicating stronger growth and lower unemployment, but also plans to raise interest rates and keep borrowing costs elevated, causing disappointment in the markets and potential challenges for borrowers.
The Federal Reserve's commitment to higher interest rates has led to a surge in Treasury yields, causing significant disruptions in the bond market and affecting various sectors of the economy.
The gold price today is falling due to the strength of the U.S. dollar, declining inflation, and the U.S.'s failure to follow a balanced government budget, causing investors to wonder about the best strategy in the short term.
The Federal Reserve's preferred measure of inflation decreased in August, indicating that efforts to combat inflation are progressing, although there are still price growth pressures that could lead to further interest rate hikes by the central bank.
Rising Treasury rates and oil prices are creating an unfavorable situation for consumers, investors, and the economy, making it challenging for the Federal Reserve to manage inflation without causing a recession. The potential for a "soft landing" and decreased inflation remains, but the economy should prepare for possible sector-by-sector recessions and a full-blown recession, along with government shutdowns and fiscal policy disputes becoming normal occurrences. The discrepancy between short-term and longer-term rates controlled by the Fed has gained importance, with higher borrowing costs disrupting the stock and bond markets. In this volatile period, long-term investors should hold on and ensure they have enough money saved to weather the storm. While the Fed has pushed short-term rates higher, it has also benefited savers with higher yields on money market funds, short-term Treasury bills, and high-yield savings accounts. However, a strong dollar has impacted S&P 500 earnings, leading to a struggling stock market and increased costs for imports and exports. Rising interest rates pose the greatest economic challenge, affecting consumer loans and dampening spending. Traders who bet on long-term bonds have faced losses due to rising rates, highlighting the inverse relationship between interest rates and bond prices. As a result, it may be advisable to purchase shorter-term Treasuries and keep bond durations lower. The surge in bond yields has also disrupted stock investors' expectations of controlled inflation and the Fed's tightening, leading to stock market losses. The economy and markets may experience more turmoil, as there are various factors beyond the Federal Reserve's control.
The US economy is facing turbulence as inflation rates rise, causing losses in US Treasuries and raising concerns about the impact of high interest rates on assets like Bitcoin and the stock market. With additional government debt expected to mature in the next year, there is a fear of financial instability and the potential for severe disruptions in the financial system. The Federal Reserve may continue to support the financial system through emergency credit lines, which could benefit assets like Bitcoin.
Billionaire real estate mogul Barry Sternlicht warns that the Federal Reserve's rate hikes are worsening the economy and causing inflation levels to drop below target, urging the central bank to cease interest rate increases.
The rally in the U.S. dollar and higher U.S. bond yields have led to a decline in gold prices, with the metal seeing its worst week, month, and quarterly losses, as the Federal Reserve maintains its restrictive monetary policy and investors anticipate further weakness in the gold market.
The Federal Reserve's expected interest rate hikes have had a significant impact on gold and bonds, causing gold prices to decline and the US Dollar to reach a ten-month peak; however, concerns have been raised about whether these measures are sufficient to counteract inflation, leading to speculation about potential adjustments in rate policy.
Gold futures experienced their second largest monthly decline of the year in September, losing $99.80 or 5.08%, which can be attributed to the Federal Reserve's monetary policy and their delayed reaction to rising inflation.
The Federal Reserve's shift towards higher interest rates is causing significant turmoil in financial markets, with major averages falling and Treasury yields reaching their highest levels in 16 years, resulting in increased costs of capital for companies and potential challenges for banks and consumers.
The chaos in Washington and uncertainty surrounding a possible government shutdown could make it less likely for the Federal Reserve to raise interest rates again this year, as the economy and inflation appear to be cooling off.
Precious metals prices have been declining recently due to the higher interest rate projections by the Federal Reserve, but the weakness in gold prices may also be influenced by China's internal market dynamics and its impact on global gold prices.
The Federal Reserve's acceptance of the recent surge in long-term interest rates puts the economy at risk of a financial blowup and higher borrowing costs for consumers and companies.
The recent stock market declines may indicate that the Federal Reserve's actions could result in future pain for the economy.
Gold prices are slightly lower after the US employment report for September shows stronger-than-expected non-farm payrolls gains, indicating that the Federal Reserve will likely maintain its hawkish stance on monetary policy.
The Federal Reserve is expected to continue reducing its bond holdings despite the recent surge in bond yields, as key measures of volatility and liquidity in the bond market are not indicating a significant risk, and higher credit costs align with the central bank's goal of restraining growth and lowering inflation.
The Federal Reserve is facing a tough decision on interest rates as some officials believe further rate increases are necessary to combat inflation, while others argue that the current rate tightening will continue to ease rising prices; however, the recent sell-off in government bonds could have a cooling effect on the economy, which may influence the Fed's decision.
Some Federal Reserve officials are optimistic about finding a monetary policy that lowers inflation to their 2% target without causing high unemployment, but there are risks that could push the Fed onto a more familiar path of an economy struggling with rising borrowing costs and waning confidence.
The U.S. Federal Reserve is expected to keep its key interest rate unchanged on November 1 and may delay rate cuts until the second half of next year, according to a Reuters poll of economists.
The Federal Reserve has expressed concerns about persistent inflation, potential losses in the US office market, and funding pressures on certain banks in its recent report.
