Gold rose as the reasons why the Federal Reserve left interest rates unchanged in September were revealed.
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Lockhart, a well-respected centrist and a voter on the Fed’s monetary policy committee this year, said the global slowdown and last month’s weak U.S.jobs report show there is “a touch more downside risk” to the USA economy. Analysts said that the minutes were dovish and a delay of rate rise supported gold as gold bears no interest.
Officials also noted that the Fed’s policy tools were better able to deal with an unexpected jump in inflation than it could deal with inflation falling even lower. Futures traders are pricing in an 10 percent probability of a rate increase at the October meeting and 39 percent increase in December, based on an assumption that the effective funds rate will settle at 0.375 percent after liftoff.
Dudley said that while a decision to raise rates at the Oct. 27-28 meeting was “possible”, he added: “Have we seen enough information between September and October to convince us to do in October what we didn’t do in September?”
The dollar saw mixed fortunes against a basket of global currencies on Friday, as the USA wholesale inventories data for August beat market expectations.
“I would like it to move up more quickly than that, but at the moment, we’re just thinking that that’s what appropriate policy would be”, he told reporters in Milwaukee after delivering a speech.
Meanwhile, other economic reports did not paint an encouraging picture either.
But since then, the government has released economic data that could give Fed officials further pause.
Still, he said, “I continue to feel that cumulative progress is consistent with liftoff relatively soon”.
The Fed has kept its key rate at a record low near zero since December 2008. The thought was that China’s problems could have a more severe impact on the US economy than they had forecast.
The September meeting had been preceded by weeks of speculation over whether the Fed would vote to raise rates.
Lockhart also said financial market turmoil shouldn’t be overly influential to the Fed.
“Many participants judged that the effects of these developments on domestic economic activity were likely to be small”, the minutes state.
But now it seems that gold may be resuming its historic role as the asset of last resort. Indeed, with Russian Federation flexing anew its muscles in the Middle East, it looks increasingly like America cold-war adversary is again competing with a few success for influence on the world stage.
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When the Fed does start raising rates, something it has not done in nine years, it will eventually mean higher rates for consumer and business borrowers.
