Ok, So Maybe The Fed Is Serious….
New York (May 20) Just when most discounted the possibility of a Fed rate hike in June -- the central bank threw a curve ball on Wednesday.
The minutes from the April FOMC meeting minutes revealed growing support for a rate hike as soon as next month. The news pushed the dollar higher and in turn, is hurting commodities.
The CME FedWatch, a tool that projects rate hike probabilities, suggests there is a 30% chance the Fed raises interest rates during its June 14-15 meeting.
If they do raise rates, then has gold’s great run this year come to a halt? As of newsletter time, spot gold on Kitco.com was trading down $1.70 at $1,253 an ounce.
Kitco’s global trading director, Peter Hug is confident the Fed will not budge. “We continue to believe the Fed stands pat in June, given the macro picture but suspect even if they move, it will be a one and done affair, similar to 2015,” he said post-FOMC.
And famed economist Marc Faber, known for his usually “gloomy” economic outlook, says he doesn’t see the Fed’s tightening cycle continuing this year.
“My impression is that the economy is actually weaker than the statistics would suggest,” the publisher of the Gloom, Boom, & Doom report told Kitco News this week. “My impression will also be that eventually there will be some type of helicopter money in the U.S., or the launch of QE4.”
I attended the Capital Economics conference the morning of the FOMC, where Paul Ashworth, chief U.S. economist for the firm, was speaking on the U.S. recovery. He basically painted the picture of how the Fed is stuck between a rock and a hard place, and is pretty confident the Fed WILL raise rates. He explained that the focus is on deflation risk, but shrinking slack means higher inflation and higher interest rates …soon.
One quotable quote is when he noted: “Recoveries don’t die of old age, the Fed kills them. The Fed hasn’t even started to sharpen the knife: real rates are still negative,” he said to the packed room of 300+ attendees.
Source: KitcoNews
