It has room to accelerate its rate increases if the economy were to heat up so much as to ignite inflation.
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For San Francisco Fed President John Williams, one of the 17 members participating in the central bank’s rate-setting deliberations, all that is needed is a bit more confidence that inflation is indeed headed toward the Fed’s 2 percent target.
Gold is particularly sensitive to a rise in interest rates as it would increase the opportunity cost of holding non-yielding bullion, while also the bolstering the dollar which gold is priced in, making the metal more expensive to foreign currencies. But policymakers likely want to see the hard data.
Meanwhile, major producers are ramping up in effort to take advantage of plus-$40 oil prices while they can. Purchases in gold-backed exchange-traded funds have also slowed in the past two weeks after touching a three-year high on July 11, data compiled by Bloomberg show. It inched down mildly of 0.19 percent to register at 97.282 in late trading on Monday.
The Australian dollar went up to $0.7469 from $0.7463. Economists forecast a dip to a fresh trough of 1.4 percent, likely cementing the case for another rate cut as early as next week.
Economic data points have been surprising to the upside.
The Fed will conclude a two-day policy meeting on Wednesday. But as the central bank meets the week of July 25, a resurgent US economy and job market have led many to predict a Fed move by December if not sooner.
Exxon’s shares fell 1.8 percent and were the biggest drag on the S&P, while Chevron’s 2.3 percent decline had a similar effect on the Dow.
In the U.S., June retail sales rose 0.6%, which was above consensus. Verizon’s shares rose 0.4 percent. During the session, Brent fell to $44.14, its lowest since May 10.
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Federal Reserve officials are virtually certain to leave short-term interest rates unchanged at their meeting this week, following the U.K.’s decision in June to quit the European Union and mixed messages from the US labor market. According to the CME Group’s Fed-watch tool, the current implied probability of a hike from 0.50 to 0.75 is at 2 percent for the July meeting, 20 percent at the September 2016 meeting, 23 percent at the November 2016 meeting, and 45 percent at the December meeting. Republication or redistribution of content provided by EconoTimes is expressly prohibited without the prior written consent of EconoTimes, except for personal and non-commercial use.
