FOMC Minutes Reflect A More Hawkish Fed
Possiblyone of the most important sources of economic information to be released thisweek is the minutes from the September FMOC meeting held by the Federal Reserve,which has been released today.
Theminutes confirmed the information conveyed in their press statement which was releasedimmediately upon the conclusion of the meeting as well as news from a press conference with questions andanswers by Chairman Jerome Powell. However, the minutes conveyed a much morehawkish Federal Reserve than usual.
Theminutes confirmed the information released in their statement stating that theU.S. economy is on a strong growth path.The minutes also confirmed that strong economic growth would warrant futuregradual increases in the Fed funds interest rate. This, for the most part, was and is factored into current marketsentiment.
However,there were two major concepts that wereoutside of any information released either in last month statements or verballyby Chairman Jerome Powell during his press conference held immediately afterthe conclusion of the meeting.
Thesenew pieces of information contained much stronger verbiage or terminology thanpreviously stated and suggested that the Federal Reserve members are moving toa much more hawkish stance regardingtheir monetary policy.
First,although the Fed has already signaled that further interest rate hikes will beforthcoming, and therefore removing the word “accommodative “to describe thecurrent monetary policy would be appropriate, for the first time they replacedthat word with “restrictive” to describe the current monetary policy.
Secondly,they spoke about the real possibility that interest rates would need to be raised above their anticipated“normalization” rate which is believed to be setat approximately 3%.
Accordingto Reuters, “U.S. central bankersdiscussed raising interest rates soon to counter excessive economic strengthbut also examined how global trade disputes could batter businesses andhouseholds, minutes of the Federal Reserve’s last policy meeting showed onWednesday.”
Insightsrevealed through the minutes of last month’s FOMC meeting suggest that theFederal Reserve is taking a much more hawkish stance than perceived prior to this information. The addition of theword “restrictive” to describe the current monetary policy was much morehawkish then merely stating that the Fedwas moving interest rates to a period of normalization.
Also,for the first time, the Federal Reserve suggested that it might move interestrates above the perceived target of 3%. These two factors are highly supportiveof a stronger dollar and could put additional pressure on precious metalspricing in the weeks ahead.
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Wishingyou as always, good trading,
By Gary WagnerContributing tokitco.com
Follow @garyswagner
gary@thegoldforecast.comwww.thegoldforecast.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication. |