The Fed's third-ranking official reiterated expectations of a rate cut later this year, with gold nearing the $2050 mark.
Gold prices surged after dipping to $2028 on Thursday, briefly approaching $2050 in the early hours. On Friday morning in Asia, gold prices remained above the overnight low of $2043, trading at $2046.5 per ounce in the afternoon. Following the release of the PCE data on Thursday evening, New York Federal Reserve President John Williams, the third-ranking official at the Fed, stated that he saw no need for further tightening and reiterated his expectation that the Fed would cut interest rates later this year. Williams acknowledged that inflation has fallen from its decades-high peak, but stressed that officials want to see inflation return to 2% and remain there. He expects the Fed to cut rates later this year, returning rates to a more normal level. Also on Thursday evening, Cleveland Federal Reserve President Loretta Mester, a voting member of the Federal Open Market Committee this year, said that the inflation data released on Thursday showed that policymakers still have more work to do to reduce price pressures, but that it wouldn't change her expectation that the Fed will cut rates three times this year. "The latest PCE data didn't really change my view that inflation will come down to our 2% target over time, but it does indicate that the Fed has more work to do on that front," she said. Mester previously indicated that she expected three rate cuts in 2024 when officials last updated their quarterly economic forecasts. "Now, if the economy evolves as I expect, I think that's right," she said Thursday. Fed officials will update those forecasts at their March 19-20 meeting. Also speaking on Thursday, San Francisco Federal Reserve President Mary Daly said officials are prepared to cut rates if necessary, but stressed that a rate cut isn't urgently needed given the economy's strong momentum. Atlanta Federal Reserve President Raphael Bostic said in another speech on Thursday that recent inflation data suggest that the Fed's goal of 2% inflation "will be somewhat difficult to achieve," and reiterated his view that a rate cut this summer could be appropriate. On Thursday evening, the U.S. Bureau of Economic Analysis released the January Personal Consumption Expenditures (PCE) price index. The core PCE price index, the Fed's preferred inflation gauge, rose 0.4% month-over-month in January, meeting expectations. The core PCE price index, which excludes volatile food and energy components, rose 2.8% year-over-year, also meeting expectations and marking the smallest increase since March 2021. The month-over-month increase in the core PCE price index of 0.4% was the largest since February 2023, also meeting expectations, with the previous value revised from 0.2% to 0.1%. Inflation in services excluding housing rose 0.6%, the highest level since March 2022. Peter Cardillo, chief market economist at Spartan Capital Securities, commented that core inflation was slightly better than expected, and that the overall and core inflation trends are moving in the right direction. Overall, the report wasn't overly negative, and if we see a couple of months of lower inflation, especially in the core inflation year-over-year rate, then a June rate cut could again become possible. The January Consumer Price Index (CPI) previously raised concerns about persistently high inflation, although many economists believe the inflation increase was due to seasonal factors and that the rise in housing prices is unlikely to be sustained. Recently, Fed officials have indicated that they are not in a hurry to lower interest rates and will closely monitor upcoming data to assess the appropriate policy path. The latest PCE data supports their view. The Fed will hold its next monetary policy meeting on March 19-20, and interest rates are expected to remain unchanged in the 5.25% to 5.5% range.
Time:
2024-03-01 16:58
Gold Futures, March 1: After the release of the US January core PCE price index, showing the smallest increase since March 2021, the third-ranking official of the Federal Reserve reiterated that interest rates will be cut later this year.
Gold prices surged after dipping to $2028 yesterday, briefly approaching $2050 in the early morning; in Asian trading on Friday, gold prices remained above the early morning low of $2043, and as of the afternoon, it was quoted at $2046.5 per ounce.
On Thursday evening, following the release of the PCE data, the Federal Reserve's "third-ranking official," New York Fed President Williams, stated that he saw no need for further policy tightening and reiterated his expectation that the Fed would cut interest rates later this year.
Williams acknowledged that inflation has fallen from its decades-high peak, but stressed that officials want to see inflation return to 2% and remain there sustainably.
He expects the Fed to cut interest rates later this year, returning rates to a more normal level.
That same evening, Cleveland Fed President Loretta Mester, a voter this year for the Fed, said that Thursday's inflation data showed policymakers still have more work to do in easing price pressures, but she said it wouldn't change her expectation that the Fed will cut rates three times this year.
"The latest PCE data didn't really change my view that inflation will come down to our 2% target over time, but it does indicate that the Fed has more work to do on that front," she said.
Mester previously said she expected three rate cuts in 2024 when officials last updated their quarterly economic projections.
"Now, if the economy evolves as I expect, I think that's right," she said Thursday. Fed officials will update those projections at their March 19-20 meeting.
Speaking the same day, San Francisco Fed President Mary Daly said officials are prepared to cut rates if necessary, but she stressed that a rate cut isn't urgently needed given the economy's strong momentum.
Atlanta Fed President Raphael Bostic said in another speech on Thursday that recent inflation data suggest the Fed "will have some difficulty" achieving its 2% target and reiterated his view that a rate cut could be appropriate this summer.
Last night, the US Bureau of Economic Analysis released the January PCE price index. As the Fed's preferred inflation gauge, the US January core PCE price index rose 0.4% month-on-month, in line with expectations.
The core PCE price index, which excludes volatile food and energy components, rose 2.8% year-on-year, also meeting expectations and marking the smallest increase since March 2021.
The January core PCE price index rose 0.4% month-on-month, the largest increase since February 2023, also meeting expectations, with the previous value revised from 0.2% to 0.1%.
Inflation in services excluding housing rose 0.6%, the highest level since March 2022.
Peter Cardillo, chief market economist at Spartan Capital Securities, commented that core inflation was slightly better than expected, and the overall and core inflation trends are moving in the right direction. Overall, the report wasn't overly negative, and if we see a couple of months of lower inflation, especially in the core inflation year-on-year rate, then a June rate cut could again become a possibility for the Fed.
Earlier, the US January Consumer Price Index (CPI) raised concerns about persistently high inflation, although many economists believe the inflation increase was driven by seasonal factors and that the rise in housing prices is unlikely to be sustained.
Recently, Fed officials have indicated that they are not in a hurry to lower interest rates and will closely monitor upcoming data to assess the appropriate policy path.
The latest PCE data supports their view, and the Fed will hold its next monetary policy meeting on March 19-20, with interest rates expected to remain unchanged in the 5.25% to 5.5% range.
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