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(Kitco News) – The gold market is taking in stride hawkish comments from Federal Reserve Chair Jerome Powell during the first day of his Semiannual Monetary Policy Report to Congress.
Powell noted that although inflation has fallen sharply from last year’s 40-year highs, it still remains well above the central bank’s 2% target. He added that although the economy has been fairly resilient, the Committee expects to see slower growth to further cool down inflation pressures.
He said that the central bank still has a long way to go to bring inflation back down to its target.
“We remain committed to bringing inflation back down to our 2 percent goal and to keeping longer-term inflation expectations well anchored. Reducing inflation is likely to require a period of below-trend growth and some softening of labor market conditions. Restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run,” Powell said in his opening remarkets before the House of Representatives Committee on Financial Services.
The gold market is not seeing much reaction to Powell’s comments as prices remain below important near-term support at $1,950 an ounce. August gold futures last traded at $1,940.70 an ounce, down 0.37% on the day.
$Gold support test$GC back to 1936. tested a few times already this morn
the prepared remarks from Powell sound hawkish to me. Let’s see if or how much he walks that back during the actual testimony https://t.co/2KsZfPcmop pic.twitter.com/t2SrKAwUUj
— James Stanley (@JStanleyFX) June 21, 2023
Powell’s comments come a week after the Federal Reserve left interest rates unchanged in a range between 5.00% and 5.25%. However, the central bank maintained its hawkish bias as it signaled potentially two more rate hikes this year.
“Nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year. But at last week’s meeting, considering how far and how fast we have moved, we judged it prudent to hold the target range steady to allow the Committee to assess additional information and its implications for monetary policy,” Powell said.
Although the Federal Reserve looks to maintain its aggressive monetary policy stance, Powell provided little forward guidance to Congress.
“In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, we will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. We will continue to make our decisions meeting by meeting, based on the totality of incoming data and their implications for the outlook for economic activity and inflation, as well as the balance of risks,” he said.
Powell’s opening statement is also not having much impact on interest rate expectations as the market continues to price in a rate hike next month. According to the CME FedWatch Tool, markets see a 79.4% chance of a 20 basis point move in July, up from 77% priced on Tuesday.
