The Fed is widely expected to increase interest rates by 25 bps, the second phase of a slowing pace in rate hikes since previous announcements. However, of more importance is the tone that Fed Chair Powell exudes amid the FOMC meeting that traders will closely monitor.
As markets continue to phase out the “don’t fight the Fed” perception, the price of gold has predominantly already priced in a 25 bps rate hike and a pause in the March meeting is anticipated by many. Would this lead to a short-term pull-back for the gold prices? The surprise would be a higher rate and hawkish remarks.
Fed Chair Jerome Powell commented himself in previous meetings, quoting Milton Friedman, in that monetary policy works with long and variable lags, he has continually pushed back against market expectations, emphasizing that rate will remain higher for longer until inflation has eased meaningfully towards the 2% target. Will the Fed claim victory anytime sooner? Or will there be a claim.
We will find out more clues as we head into this key event amongst a week full of market headlines.
Key takeaways from today’s FOMC Feb 2023 Decision
We’ve been following the Federal Reserve’s interest rate decision very closely and here are the key takeaways from their statement:
- As expected, the FOMC has raised the benchmark rate by 25 bps to the target range of 4.5% to 4.75% – another reduced pace in rate hike from December’s 50 bps raise.
- In the press, Chair Powell had the chance to push back on easing financial conditions but he largely didn’t, not quite the messages he was portraying in the previous months.
- The market continued to embrace the soft landing narrative as Gold surged, dollar down, commodity currencies rallied, and the US equity soared.
Don’t forget to check out our The Month Ahead Feb 2023 article to find out what other major economic news are being released this month.
