Gold Prices Sees Little Reaction To Powell's Support Of Gradual Rate Hikes
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(Kitco News)- As expected newly minted Fed Chairman Jerome Powell is keeping a steady hand on the monetary policy tiller as he reiterated a gradual pace of interest rate hikes in his first testimony before the House Committee on Financial Services.
"In gauging the appropriate path for monetary policy over the next few years, the FOMC will continue to strike a balance between avoiding an overheated economy and bringing PCE price inflation to 2 percent on a sustained basis," he said in his opening remarks, published 90 minutes before the hearing. "In the FOMC's view, further gradual increases in the federal funds rate will best promote attainment of both of our objectives. As always, the path of monetary policy will depend on the economic outlook as informed by incoming data."
The gold market some positive movement in delayed reaction reaction to Powell's widely anticipated remarks. The gold market had been under modest pressure ahead of the report but has managed to cut its losses. Comex April gold was last down $5.30 to $1,327.50 an ounce.
Powell’s opening remarks were relatively positive as henoted growing tailwinds in the U.S. economy.
“The robust job market shouldcontinue to support growth in household incomes and consumer spending, solideconomic growth among our trading partners should lead to further gains in U.S.exports, and upbeat business sentiment and strong sales growth will likelycontinue to boost business investment,” he said.
He also dismissed recent volatility in financial markets.
“Despite the recentvolatility, financial conditions remain accommodative,” he said.
Further toeing the centralbank line, Powell said that it is expected inflation will continue to pushtowards the committee’s 2% target. He added that the central bank continues tomonitor inflation developments closely.
Royce Mendes, senioreconomist at CIBC World Markets described Powell’s optimistic comments as onthe hawkish side.
“He showed confidence that wages would continue to rise andthat inflation would reach the 2% target. On thier own, those comments could beinterpreted as at least somewhat more hawkish than his predecessor. But therewas also a clear attempt not to roil markets,” he said.
Paul Ashworth, chief U.S. economist atCapital Economics, said that Powell’s comments support’s the expectations of aMarch rate hike, which markets have already priced in as a near certainty.
The U.K. research firm also continues toexpect the U.S. central bank to raise interest rates four times in 2018.
By Neils ChristensenFor Kitco News
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nchristensen@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.