Fed Less Hawkish In Our View
(Kitco News)- The Federal Reserve acted in line with our expectations,leaving rates unchanged and suggesting a less hawkish outlook. The wordingsurrounding the Fed’s inflation target was the focus. The Fed officials’ dialogue suggested that inflationtargets were nearing their levels but as long as inflation was around 2% on a“symmetrical” basis, they would continue to raise rates in a gradual format.The word symmetrical suggested that the Fed may allow inflation to exceed it’s target, as long as the overall average heldaround 2%. Issues with world trade, geopolitical risks with Iran and NorthKorea and the weakness (volatility) in equities were probably all factors inthe Fed’s less hawkish tone. The next “news” event is tomorrow’s employmentnumbers, which if they come in under 160,000, should also confirm that the Fedis likely to pull back. The markets havepriced in three to four rate increases thisyear and we continue to argue that unless the economy begins to show increasedsigns of growth, which is currently not the case, these forecasts areaggressive. Unless we get a surprise in the number tomorrow, i.e. job growthnorth of 220,000, the bottom, in the short-term, has been seen in gold. Wewould change to a bearish posture on a close below $1,305.
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