Gold prices rise as Fed keeps rates unchanged and no rate hike expected by 2022


Editor’s note: Find yourself in minutes with our quick summary of today’s must-see news and expert opinions that have moved precious metals and the financial markets. Register here!(Kitco News) Gold prices rose after the Federal Reserve kept interest rates unchanged and did not report any rate hikes until 2022.
The interest rate remained between zero and 0.25%.
Gold prices climbed following the announcement, as Comex’s last gold futures contract for August was $ 1,727.50, up 0.33% on the day .
The statement, released Wednesday afternoon, reiterated that the Fed is ready and committed to “use its full range of tools” to support the US economy.
“The coronavirus epidemic is causing enormous human and economic hardship in the United States and around the world. The virus and the measures taken to protect public health have led to a sharp drop in economic activity and an increase in job losses. Weaker demand and considerably lower oil prices are slowing consumer price inflation, “the statement said.

The central bank noted improving financial conditions but forecast tough times for the US economy despite surprisingly high jobs last month.
“The current public health crisis will weigh heavily on economic activity, employment and short-term inflation and pose significant risks to the medium-term economic outlook,” the statement said. “The Committee plans to maintain this target until it is satisfied that the economy has survived recent events and is on track to meet its maximum employment and price stability targets. “
The Fed has also released its first quarterly forecast since December, including a point chart of its rate projections. This comes after the central bank decided to suspend forecasting in March due to all the uncertainty surrounding the coronavirus.
In the latest interest rate projections, the central bank median predicts that interest rates will remain at current levels until 2022.

Regarding growth, the Federal Reserve forecasts that US GDP will contract by 6.5% this year, down from December’s estimates of 2.0% growth. American economic activity is expected to grow 5% in 2021, and 3.5% in 2022.
The unemployment rate in the United States is expected to be around 9.3% this year, followed by a recovery to 6.5% in 2021 and 5.5% in 2022.
The US central bank also predicts that price pressures will be weak, with projections showing inflation at 0.8% this year, 1.6% in 2021 and 1.7% in 2022.
Core inflation expectations, which eliminate volatility in food and energy prices, are 1% this year.
The Fed also promised to keep bond purchases at least at the current rate of about $ 80 billion a month in treasury bills and $ 40 billion a month in agency-backed and mortgage-backed securities.
“To support credit flows to households and businesses, the Federal Reserve will increase its holdings of government and residential and commercial mortgage-backed securities at least at the current rate in the coming months in order to maintain the good functioning of the market, thus promoting efficient transmission. from monetary policy to broader financial terms. In addition, the Open Market Desk will continue to offer large-scale buyout operations overnight and over time, “said the central bank statement.
Following the Fed statement, President Jerome Powell said that the use of yield curve control remains an open question after noting that the central bank had considered the use of official prospective guidance, purchasing assets as well as the targeting of the yield curve at the monetary policy meeting. . “The Fed will continue discussions at future meetings,” said Powell.

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