Gold prices rose in Monday afternoon trading after Federal Reserve Chairman Jerome Powell said the central bank won’t wait until inflation hits 2% to cut interest rates.
Powell’s dovish remarks to the Economic Club in Washington sent the clearest message by far to investors that federal policymakers would soon move to reduce the benchmark interest rate from its 5.25% to 5.5% range. After Powell spoke, the market pegged the likelihood of a reduction at the Sept. 17-18 Federal Open Market Committee meeting at 98%, according to the CME FedWatch tool.
“The implication of that is that if you wait until inflation gets all the way down to 2%, you’ve probably waited too long because the tightening that you’re doing, or the level of tightness that you have, is still having effects which will probably drive inflation below 2%,” Powell said.
The Fed wants to see the inflation rate at 2%, and for months, officials have publicly signaled the need for more data to be confident in that trajectory before reducing interest rates. On Monday, Powell indicated the Fed had the assurance it was looking for.
“What increases that confidence is more good inflation data, and lately here we have been getting some of that,” Powell said.
Powell’s remarks provided the momentum for gold to start the trading week on a strong note. The yellow metal was up $13.56 Monday afternoon at $2,422 per ounce. Silver trading was more mixed, dabbling back and forth between positive and negative territory. It was up $0.05 in midday trading at $30.67 per ounce.
Powell set the table for a week packed with as many as 10 scheduled speeches by nine members of the Fed, as central bank officials are barred from commenting on monetary policy beginning on July 20 heading into the agency’s July 30-31 meeting.
Late Monday afternoon, San Francisco Federal Reserve President Mary Daly will speak. On Tuesday, Federal Reserve Governor Adriana Kugler will deliver remarks, followed on Wednesday with speeches by Richmond Federal Reserve President Tom Barkin and Federal Reserve Governor Christopher Waller.
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