Gold rises to historic levels
Gold rose during today's trading on Tuesday, setting a new historical high near the levels of 3760 dollars per ounce, supported by hopes of an additional reduction in interest rates by the Federal Reserve this year.
The Fed's interest rate cut and its effects
The Federal Reserve made its first interest rate cut this year last week, and signaled further cuts in the future as the labor market weakened.
This has prompted the markets to calculate almost two additional cuts of 25 basis points at the remaining central bank meetings this year.
On the other hand, US Treasury yields rose slightly amid several Federal Reserve officials indicating a more cautious approach to the interest rate cut cycle, stressing that there are still potential inflationary risks.
Investors backed away from the prospect of an interest rate cut by the US Federal Reserve in October following these comments.
The statements of some Fed members yesterday were as follows:
- The head of the St. Louis Federal Reserve, Alberto Musalem, said that the central bank should proceed with caution, because the interest rate that takes into account inflation may already be close to neutral.
- Atlanta Fed President Rafael Bostic said that the focus should remain on ensuring that inflation returns to the Fed's target of 2% from its current level, which has risen by about a percentage point, and that there is no need for further interest rate cuts this year.
- As the head of the Cleveland Federal Reserve, Beth Hammack, said, the Fed should be very careful in removing monetary policy constraints.
Hammack and Bostick did not vote on Fed policy this year.
- Quite the contrary, Stephen Miran, the new governor of the Federal Reserve, stated that the Fed miscalculated the extent of its tightening of monetary policy, and that it will endanger the labor market unless it significantly reduces interest rates.
Traders are now awaiting Fed Chairman Jerome Powell's statements on the economic outlook later today and the release of the Personal Consumption Expenditures price index on Friday, the Fed's preferred inflation gauge for additional policy signals.
