Will Federal Reserve Remain “Patient” on Interest Rates?
Posted by Brian Ford on March 18, 2015
The gold spot price is fluctuating rather wildly this morning due to investor insecurity over what will happen during this afternoon’s Federal Open Market Committee (FOMC) meeting. The FOMC, a group comprised of the Federal Reserve’s governors, has indicated in recent meetings that it will remain “patient” in its effort to raise interest rates from near-zero, where they have been since the economic recession. As of 10am EST on Wednesday the gold spot price was just a hair under even at $1,148.20 per ounce.
Even higher levels of gold market volatility are expected after the meeting’s minutes are released this afternoon, and you can count on the Certified Gold Exchange for an update at that time.
There has been widespread speculation about movement of the Fed’s prime lending rate, currently at a lowly 0.25%. Such a low rate allows borrowers on Wall Street to infuse money into their companies for almost nothing, and many economists believe that this is one of the key motivators behind the recent improvement in our economy’s performance. Some say that a rate hike could send the U.S. economy into a tailspin and cause another recession, or worse.
Some believe that rates could rise as early as May, while others are questioning if the Fed will raise rates at all in 2015. “With the debt limit suspension over and the economy seemingly performing well, [Fed chair] Janet Yellen is going to really have her work cut out for her if she wants to keep rates this low,” said CGE analyst Jacob Arum. “The minutes of today’s meeting, as well as the economic projections that will be released today, could put pressure on gold prices or send them through the roof.”
Yellen, still relatively new in her post after taking over for Ben Bernanke, is expected to give an interview to reporters after the FOMC meeting ends. “Her remarks to reporters on the status of our economy are likely to provide trading fodder, but we’ll just have to wait and see what she says to know which way the gold and silver markets will trend next,” said Arum.
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