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(Kitco News) – Gold prices are trading near session lows as minutes from the Federal Reserve’s February monetary policy meeting showed that some members supported more aggressive measures.
At the beginning of the month, in a widely expected move, the Federal Reserve unanimously decided to raise interest rates by 25 basis points; However, the minutes show that some members favored a move of 50 basis points.
“Few respondents said they would have preferred a 50 basis point hike in the target range for the federal funds rate at this meeting or that they could have supported a target hike by that amount. Those who favored a 50 basis point increase indicated a larger increase would bring the target range closer to levels more quickly. which they believe will achieve a sufficiently restrictive position, taking into account their views on the risks of price stabilization in due course.”
While gold prices fell into negative territory as an initial reaction to the minutes, price action remains somewhat muted. April gold futures were trading at $1,838.40 an ounce, down 0.22% on the day.
Not only did some members of the central bank committee support tougher action, but the entire committee agreed that more rate hikes would be necessary to bring down inflation. The minutes also showed that the Fed wants to maintain its hawkish policy stance for longer than initially expected.
With inflation still well above the Committee’s long-term target, respondents generally noted that upside risks to inflation expectations remained a key factor in shaping policy expectations, and that maintaining a restrictive policy stance until inflation is on a clear path towards 2 per cent is from a risk management perspective. “.
One positive thing for the gold market is that the central bank sees more downside risks to the economy and the possibility of a recession.
“Participants agreed that risks to the outlook for economic activity are outweighed to the downside. Participants noted that the sources of these risks include the potential for unexpected negative shocks that push the economy into recession in an environment of weak growth, and the simultaneous policy effects of major central banks, the minutes emphasized. and turmoil in the financial system and the broader economy linked to fears that the legal debt limit may not be raised in a timely manner.”
Paul Ashworth, chief North America economist at Capital Economics, noted that given the recent comments from Fed officials, it’s not surprising that some members supported a 50 basis point hike.
“The more pertinent question now is how will Fed officials at the next meeting this month react to the stronger January data series? Will they see this as support for their current views or see this strength as a reason to add more hikes to their forecasts? We suspect that the majority will prefer the former in Mostly, especially since off-season weather and seasonal problems may have played a role.”
Disclaimer: The opinions expressed in this article are those of the author and may not reflect the opinions of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; However, Kitco Metals Inc. cannot. Nor does the author guarantee this accuracy. This article is for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. does not accept The author of this article will not be held liable for losses and/or damages arising from the use of this publication.
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