Fed Stands Pat On Rates, Gold Rallies On Dovish Perceptions

New York (June 19)  Despite more pressure from the U.S. President Donald Trump to cut rates, the Federal Reserve announced that it is keeping its key benchmark interest rate unchanged following a two-day monetary policy meeting.

This was a widely expected decision, with investors largely focused on any clues as to the possible July rate cut. Prior to the decision, markets were pricing in a 74.2% chance of the Fed standing pat on rates during this meeting and a 63.8% chance of a rate cut in July, according to the CME FedWatch Tool.

The Fed’s announcement kept the federal funds rate steady at a range of 2.25% to 2.50%, with 9-1 Federal Open Market Committee voting to keep rates unchanged.

Immediately after the statement was released gold saw a jump and August Comex gold futures were last at $1,357.30, up 0.52% on the day.

The key things in this decision were the “dot plot” projections, lower inflation expectations, GDP projections and the Fed removing the word “patient” from its arsenal when referring to future policy moves.

The “dot plot” projections represent anonymous and individual rate projections of Fed policymakers and are often treated by analysts as expectations of what to come. In the previous Fed’s dot plot projections released in March showed that no rate moves were expected for 2019.

KitcoNews