Metals News
Fed's Powell Cautious on Rates, Inflation Data to Guide Future Decisions
Federal Reserve Chair Jerome Powell emphasized the potential for declining inflation while maintaining a cautious tone on interest rates, acknowledging them as restrictive. Despite Powell's optimism, recent disappointing inflation and wage data have shifted investor focus from the Federal Reserve's forecasts to actual economic trends. Powell asserts his views, but as Neil Dutta from Renaissance Macro Research notes, it is the concrete inflation figures that will ultimately guide the Fed's actions. Meanwhile, the Fed's latest policy statement hints at a potential rate cut, though former advisor William English suggests that persistently high inflation could lead to a reversal of this stance, increasing the likelihood of rate hikes.
Gold Prices Dip as U.S. Rate Cut Hopes Diminish Amid Inflation Concerns
Gold prices declined on Thursday as investors reevaluated the likelihood of U.S. interest rate cuts after the Federal Reserve indicated that inflation progress has stalled, suggesting higher interest rates may persist longer. Despite a brief surge in gold prices following a dip in the dollar and Treasury yields, the gains were short-lived. The Fed’s recent decision to maintain steady interest rates, coupled with cautious remarks about potential rate cuts, reflects ongoing concerns about inflation. Analyst Ross Norman noted that while delayed rate cuts are generally seen as negative for gold, the market's fluctuations offer temporary relief.
Powell Dismisses Stagflation Fears
During a recent conference, Federal Reserve Chair Jerome Powell dismissed concerns about stagflation, referencing historical contexts where stagflation involved much harsher economic conditions than those seen today. Despite a GDP growth report of 1.6% and a core PCE price index increase of 3.7%, Powell cited current solid growth and inflation under 3% as evidence against imminent stagflation. However, given Powell's previous misjudgments on economic trends, including a missed prediction on post-pandemic inflation spikes, UBS has developed strategies in case his current assessments prove incorrect again.
U.S. Labor Market Holds Strong; First Quarter Productivity Sees Minor Dip
The number of new unemployment claims last week stayed low, indicating a strong economic support into the second quarter. Despite a near halt in worker productivity growth in the first quarter, economists dismissed concerns, attributing the slowdown to seasonal patterns and affirming the overall solid productivity trend.
Steady Unemployment Claims Signal Robust U.S. Labor Market
Despite a slight stall in worker productivity in the first quarter, the U.S. labor market remains tight, with unemployment claims maintaining a steady, low level last week. Economists are optimistic, attributing the productivity slowdown to seasonal quirks and maintaining a positive outlook for the economy’s performance in the second quarter.