Fed kept interest rates on hold as expected after two-day meeting on Wednesday and as dollar index rose due to no rate cut signal, gold prices fell to one-week low on Thursday. In Fed statement, it was said that patient approach would remain while officials underlined tight labor market and strong economic activity and moreover, rate cut hopes faded away since weak inflation was stated to be due to transient factors. After the meeting, Fed Chair Jerome Powell said there was no reason to move either way in terms of current policy while stating they would take it into account if downside inflationary risks were to be persistent. In the meantime, while focus is now on trade talks between the US and China, it was claimed that a trade deal could be announced by next Friday.
Gold prices declined to one-week low pressured by rising dollar index and note yields following Fed decision to keep interest rates on hold and officials giving no signal of rate cut anytime soon.
As of 15:01 GMT+3, spot gold was trading at $1,271.98 an ounce while dollar index was at 97.61. US 10-year Treasury yield was up yo 2.516.
Federal Reserve announced on Wednesday that officials decided to keep interest rates on hold while underlining inflation was expected to increase with strong labor market and increasing economic activity. In the statement, it was stated global economic and financial conditions would be watched closely while underlining Fed would be patient in deciding the best monetary policy in achieving maximum employment and inflation close to target 2%.
In his press conference after the meeting, Fed Chair Jerome Powell said current policy was in appropriate position and there were no reasons to move either way. Powell said recent weakness in core inflation seemed to be transient and inflation was expected to increase to target 2%, while he underlined that if weak inflation was to be persistent, they would take it into account in deciding monetary policy in the future. Powell also said low inflation allowed Fed to keep its patient approach.
Thus, Fed gave no signal of rate cut anytime soon and kept its neutral stance however US President Donald Trump will unlikely to like this since he kept criticizing Fed policies earlier this week and said Fed needed to cut interest rates one full point alongside some monetary easing.
In the meantime, focus is now on trade talks between the US and China while it was claimed that a possible trade deal would be announced by next Friday, according to CNBC. As there is no official respond to that claim yet, it was stated current negotiations focused on important structural issues and rebalancing trade between two countries, in a statement from White House. On the other hand, it was also claimed that the US could lift 10% tariffs on Chinese goods worth of $200 billion right away while 25% tariffs on goods worth of $50 billion would remain until 2020 elections in the US, according to Politico. Besides, some officials stated that two sides mostly agreed on how to implement the deal but final details would be decided next week when Chinese officials were expected to visit Washington to resume negotiations.