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| The Federal Reserve has made a shocking announcement: the interest rate could be higher than 6% |
The Federal Reserve has made a shocking announcement: the interest rate could be higher than 6%
Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, recently stated that the Fed should keep up its efforts to combat inflation, noting that service-related price increases are deeply entrenched.
Federal Reserve Chairman James Bullard said on Monday that the Fed is looking to prevent inflation while keeping the labor market healthy. He stated that interest rates should increase this year, potentially by half a percentage point.
Federal Reserve Bank of Minneapolis President Neel Kashkari suggested on CNBC that interest rates may need to go above 6% in order to bring inflation back up to the 2% target. However, the exact rate needed is yet to be determined.
The markets are confused about gold right now. Some people predict that it will reach new highs, while others think its increase will stop due to changes in the economy.
It is not possible to protect the economy from a debt default.
The Minneapolis Federal District has very few banking issues, according to him.
Yesterday, Kashkari told the Wall Street Journal that he would support leaving interest rates unchanged at the next central bank meeting as a way to assess the impacts of previous rate hikes & inflation expectations.
Kashkari suggested to the newspaper that they take things slower from this point on.
Kashkari, part of the Federal Reserve's Monetary Policy Committee, has not yet decided how he will vote, but said he would oppose any suggestion that the Fed is done taking action.
The Federal Reserve has issued new statements which have caused gold prices to drop. What are the key levels to watch?
Gold futures & spot gold prices both fell to $1,973 an ounce following comments from Neel Kashkari, President of the Federal Reserve in Minneapolis. Kashkari suggested that higher interest rates may be necessary to bring inflation back to 2%.
Jerome Powell, the Federal Reserve Chairman, recently stated that due to the disruptions in the banking sector & resulting credit activity, it may not be necessary for them to raise interest rates at their next meeting.
Gold prices rose slightly on Monday before dropping again. Investors are watching the negotiations for the US debt ceiling & Federal Reserve Chairman Jerome Powell's statements from Friday. Today, President Joe Biden & House Republican Leader Kevin McCarthy will meet in order to continue these discussions. The markets remain uncertain about gold's future - it could reach new records or stop rising due to changing economic conditions.
The relationship between gold & the dollar.
Gold prices decreased slightly on Monday, with futures dropping 0.22% to $1,977 an ounce & spot gold falling 0.15% to $1,975 an ounce. The US dollar also decreased by 0.1%, reaching 102.977 points. Last Friday's trading saw gold prices rise at the settlement due to Federal Reserve Chairman statements which suggest a temporary halt in monetary policy tightening measures taken by the Federal Reserve.
Gold futures contracts for June delivery rose 1.1%, or $21.8, to $1981.6 an ounce on settlement day, but dropped 2% over the past two weeks.
Raising the Debt Limit
Concerns about the US debt ceiling are helping to keep gold prices steady, as talks continue for another week. On Monday, President Joe Biden & Republican House Speaker Kevin McCarthy will meet to see if they can reach a resolution after negotiations hit a roadblock last Friday. Markets will be watching closely to find out if an agreement can be reached.
Yesterday, President Joe Biden announced that he is exploring the use of a constitutional measure to prevent the U.S. from defaulting on its debt, as talks with Republicans had stalled over raising the debt ceiling. Biden said during a G7 summit in Hiroshima that he can't promise his opponents won't "fabricate a default by doing something outrageous," & noted he was looking into Article 14 of the Constitution to determine if they have the power to pass it without Congress's approval.
The Speaker of the House of Representatives & the President have ten days to come to an agreement so the US can keep paying its bills. The Speaker tweeted after speaking with the President that he has not changed his stance, & they will meet in person tomorrow to discuss further. The White House then confirmed this.
Powell's statements
Gold prices increased by 1% on Friday after Federal Reserve Chairman Powell stated that it is still unclear whether the US will need to raise interest rates further. This uncertainty stems from the effect of recent rate hikes on the economy, as well as tightening bank credit. It is difficult to keep inflation under control.
Bank stocks in the US declined on Friday after Treasury Secretary Janet Yellen reportedly informed bank CEOs that further mergers could be necessary due to several bank bankruptcies.
Jerome Powell stated at a conference in Washington held by the central bank that if inflation is not slowed down, the resulting social costs will be high. However, because credit conditions have been tightened recently, it may not be necessary to raise interest rates as much as initially planned in order to meet our objectives.
Gold prices were supported by Federal Reserve Chairman Jerome Powell's remarks, as well as the Republicans abandoning negotiations on raising the debt ceiling & temporarily stopping talks on the issue.
There is a high chance that the Federal Reserve will keep interest rates at their current levels when they meet in June, according to the "Investing Saudi Arabia" tool. Financial markets appear to be in favor of this decision.