what did the fed say wednesday?
Following its Wednesday meeting, the Federal Reserve said the economy is “expanding at a solid pace despite elevated uncertainty,” pointing to the war in Iran. The Fed, in announcing the unanimous decision to hold interest rates steady, cited strong productivity and job growth, as well as minor changes in the unemployment rate. “Inflation remains elevated relative to the committee’s 2% goal,” the Fed’s note says, citing supply constraints and price surges in the energy sector.
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How Will A Higher Interest Rate Impact Metals?
Should the Fed raise interest rates later this year, gold and silver prices will probably decline, analysts say. “In our world interest rates are like gravity,” Philippe Gijsels, chief strategy officer at BNP Paribas Fortis, told CNBC. “When interest rates rise, gravity increases and all assets are pulled down, including precious metals.” Even the prospect of higher interest rates has held metals prices down in recent weeks. Analysts at Germany’s Commerzbank said earlier this month as long as “expectations of interest rate hikes prevail,” gold prices are likely to stay down.
What Has Kevin Warsh Said About Interest Rates?
Warsh told the Senate Banking Committee in April that Trump did not “demand” he cut interest rates, and he said he would not agree to Trump demanding any particular interest rate. Trump, who long advocated for previous Fed chair Jerome Powell to cut rates, said last week Warsh should “do whatever he wants” but said there’s “no reason to raise interest rates.”
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key background
After a historic rally that carried gold prices to $5,600 and silver to $120 in January, prices came crashing down after Trump nominated Warsh as Fed chair, as he was not considered likely to cut interest rates. Metals prices have generally declined throughout the war in Iran as gold and silver have traded inversely with oil, which has surged throughout the conflict. Gold and silver hit two-month lows last week amid expectations of future rate hikes and uncertainty over the war in Iran.
further reading
Fed Holds Interest Rates Unchanged In Kevin Warsh’s First Meeting—But Higher Rates Are Expected (Forbes)
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