Federal Reserve Meeting

Federal Reserve Meeting: Investors are anticipating May’s Federal Reserve meeting and the Consumer Price Index (CPI) inflation data.

 

Content

Details

Monetary Policy Committee

 

 

 

Details

The Federal Reserve is expected to keep interest rates steady this week,
focusing on officials’ expectations regarding the timing of potential cuts and the economic trajectory.

The CPI report will show whether inflation continues to slow down after rising earlier this year.

While the Bank of Canada and the European Central Bank cut interest rates last week,
the Federal Reserve is not expected to follow suit when it meets this week.

On Wednesday, the central bank will announce its interest rate decision,
and it is expected to keep rates at the current level of 5.25% – 5.5%.

However, market watchers are expected to gain much information
this week about when the Fed might proceed with its rate cuts independently.

 

 

Monetary Policy Committee

The Federal Reserve’s Monetary Policy Committee will also issue a summary of economic projections.

These projections include the closely watched “dot plot,”
which shows the Federal Open Market Committee (FOMC) members’ expectations for the path of interest rates.

Wednesday will be a busy day for economic data. The May CPI will be released in the morning before the Fed’s interest rate announcement.

Market watchers will study the latest version of the CPI inflation report after April data showed inflation falling to 3.4%.
This report gave investors and consumers hope that prices might have started to retreat after rising earlier this year.
Fed officials have said they need to see more data showing price declines before moving to cut rates.

On Thursday, the Producer Price Index (PPI) will show the inflation path for wholesalers,
which is sometimes seen as a precursor to consumer price pressures.
Investors will also receive data on consumer sentiment on Friday, which will provide further information on spending trends and inflation expectations.

 

Federal Reserve Meeting

Continued Decline in Gold Prices

Continued Decline in Gold Prices: In recent sessions, gold prices have significantly declined,
reflecting solid impacts from the rising US dollar and US Treasury yields.
This decline comes at a crucial time before the release of core inflation data,
which may provide necessary signals about the Federal Reserve’s interest rate plans.
This article reviews the main reasons behind this decline in gold prices and the current market impacts,
highlighting the economic factors influencing and guiding future prices.

 

Topics
Details

 

 

 

Details

Gold prices fell for the second consecutive session on Thursday due to the rising US dollar
and Treasury yields ahead of the release of core inflation data,
which could provide further clarity on the Federal Reserve’s interest rate plans.
The US dollar surpassed the 105-point level, reducing the appeal of gold-priced
in the US currency for holders of other currencies.
At the same time, benchmark 10-year US Treasury yields remained
near their highest levels in several weeks, achieved in the previous session.

Despite gold bullion being a hedge against inflation,
rising interest rates increase the opportunity cost of holding non-yielding assets.
The dollar index has been recovering, and Federal Reserve policymakers have been very hawkish recently,
with Treasury yields continuing to rise.

 

Continued Decline in Gold Prices

Anticipation for Inflation Data, Fed May Keep Rates High for Longer

Anticipation for Inflation Data, Fed May Keep Rates High for Longer:
Federal Reserve officials stated they would not lower the key federal funds rate

This influences borrowing costs for all types of loans until inflation strongly trends down to 2%.
If early forecasts are correct, inflation will remain higher than Federal Reserve officials would like in April.

Content
Consumer Price Index Increase

Stable Inflation

Federal Reserve

 

 

 

 

Consumer Price Index Increase

The cost of living, as measured by the Consumer Price Index (CPI), is likely to rise by 3.4% year-over-year in April,
down from a 3.5% increase in March, according to a survey of forecasters conducted by Dow Jones Newswires and The Wall Street Journal,
ahead of the official numbers set to be released by the Bureau of Labor Statistics on Wednesday.
The “nowcast” prediction by the Cleveland Fed, which forecasts the CPI based on incoming economic data,
also called for a 3.5% annual increase as of Monday.

Prices rose faster than expected in the first three months of the year,
indicating a halt in the progress against inflation—which had significantly declined last year.

 

Stable Inflation

High inflation has been tough on household budgets because of higher prices like gas and groceries.
It forced the Federal Reserve to delay cutting its benchmark interest rate,
keeping rates high for all types of borrowing, like mortgages and credit cards.

 

 

 

Federal Reserve

The Federal Reserve might get the data it wants, but very slowly.
Officials said they are waiting for signs that inflation is on a strong downward trajectory before considering
lowering the federal funds rate from its highest level in 23 years, where it has been since last July.

However, core inflation, which excludes the volatile prices of food and energy and is closely
watched by economists as an indicator of overall inflation trends, is likely to rise by 0.3% for the month
if the agreed estimates are correct, down from 0.4% in March.

Economists found a reason for optimism in used car auctions, where wholesale prices dropped by 2.3% in April,
compared to a 14% year-over-year decline, according to data provider Manheim.
Used car prices make up a significant portion of overall inflation.
However, changes in wholesale used car prices typically affect inflation data with a few months’ delay.

 

 

Anticipation for Inflation Data, Fed May Keep Rates High for Longer

US stock indices Fate Regarding the anticipated labour market data

 US stock indices Fate Regarding the anticipated labour market data: Markets await numerous US labour market data releases during the current week,
representing the second most important factor for the US Federal Reserve after inflation data, which showed a negative reading of about 2.8% last week.

 

Topics

Significance of labour market data

Expert predictions

labour market data

 

Significance of labour market data:

The Significance of labour market data comes from previous statements from Fed members
indicated that the bank is not compelled to early interest rate cuts amidst improved labour market data,
contributing to the US economy’s ability to achieve growth in line with declining inflation,
which is encouraging for the US Federal Reserve’s monetary policy committee.

 

Expert predictions:

Experts expect a decline and negativity in labour market data to be released during trading on Friday, March 8th,
where forecasts suggest unemployment rates to remain unchanged at around 3.7%.
As for employment in the non-farm private sector, a decline to only 190,000 jobs is expected,
while the previous reading was around 320,000 jobs.
There are also negative expectations regarding wages,
with a forecast of a 0.4% decrease compared to the last reading of about 0.6%.
This has led investors to raise expectations
for the start of interest rate cuts during the upcoming May meeting due to the decline in US inflation.

 

 


labour market data

Now, all eyes are on labour market data, as a decline and weakness in the US labour market,
a driving force that could indeed prompt the Federal Reserve to cut US interest rates early this year,
may enhance the gains of US stock indices and maintain their positive momentum.
However, suppose the upcoming labour market data contradicts expectations and shows further positivity.
We might witness the opposite in that case, with major US stock indices correcting.
At that point, there could be a possibility of a decline in investors’ bets regarding the May rate cut,
which may contribute to lowering the expectations of the US bank during its upcoming meeting.

 

 

US stock indices Fate Regarding the anticipated labour market data