Wall Street sees two more Fed hikes in 2018, three in 2019

Will the Fed Break the Dollar's and S&P 500's Calm

(Kitco News) - Gold prices are holding steady just below the psychological barrier of $1,300 an ounce after the Federal Reserve suggested that it will hike interest rates more aggressively this year and the next as the USA economy continues to grow.

In its quarterly Summary of Economic Projections, officials projected the Fed's preferred inflation measure will accelerate only slightly, ending this year at 2.1 per cent rather than 1.9 per cent, and holding at that level through 2020.

Besides raising its projection for rate increases this year from three to four, the Fed removed a key sentence from the previous statement that had been viewed as foreseeing a need to keep rates low for an extended period. For 2020, the Fed foresees a median rate of 3.4 percent. In a statement released at the end of a two-day meeting, the Fed suggested that the U.S. economy is strong and not in need of a boost, according to the New York Times. The labor department reported Tuesday, just as the Fed was meeting, that the consumer price index had risen by 2.8% from a year earlier, the biggest annual gain since February 2012.

Following its two-day monetary policy meeting, the Federal Reserve raised interest rates by 25 basis points Wednesday, in line with expectations.

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He told Lee: "We've got very interesting meeting in particular tomorrow, and I just think it's going to work out very nicely". How long those talks take to reach an agreement could depend on whether President Trump sets an end date for extended talks.


The U.S. central bank has upgraded its economic outlook in the past year due to a rise in global growth along with Congress' approved tax cuts and an increase in federal spending. The statement by Fed officials explaining the vote also hinted at a slightly faster pace for future rate increases. Unemployment is 3.8%, the lowest since 2000, and inflation is creeping higher.

USA growth is also getting a boost from $1.5 trillion in tax cuts and a $300 billion increase in federal spending, with inflation at the central bank's 2 per cent target for two months.

This marks the highest level of interest rates in the United States since 2008, although the benchmark rate remains below the historical average.

The Fed offered an improved forecast for unemployment this year, lowering its forecast to 3.6%.

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"The Fed's path of gradual rate hikes and slow (balance) sheet reduction seems well established at this point". Powell said incentives in the Republican tax cut legislation could boost investment and lead to higher productivity although the timing was uncertain. Prices did not spike in response to the enormous monetary stimulus, nor has the job market cooled since 2015 when the Fed began tightening policy.

The decision reflected an economy that's getting even stronger. But if it miscalculates and overdoes the credit tightening, it can trigger a recession. All those countries have vowed to retaliate against any USA tariffs with their own penalties against US goods.

While many economists worry about a trade war harming growth, the Fed did not mention trade concerns in its statement. European Central Bank officials meet on Thursday to discuss for the first time when to end their bond-buying program although they may delay an announcement until July.

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