Will the Fed’s last big rate hike signal a turning point for gold? [Video]
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The most highly antipated FOMC Meeting of 2022 and quite possibly the most important monetary policy decision in Jerome Powell’s career is finally here – with growing expectations that the Fed is on the verge of a major policy pivot.
This first week is all about rate hikes with trader’s attention firmly focused on the outcome of the Federal Reserve’s monetary policy meeting on Wednesday.
As one of the “Big 4 Central Banks”, this event is guaranteed to be a major market mover – especially as the Federal Reserve looks set to deliver a fourth straight super-sized rate increase – with Chairman Jerome Powell likely to hint at a downshift in the future pace of rate hikes.
The Federal Open Market Committee is expected to raise rates by another whopping 75 basis points on Wednesday to a range of 3.75 to 4% – the highest since 2008 as the central bank extends its most aggressive tightening campaign since the 1980s.
At an eagerly awaited press conference, following the rate hike decision – the Fed's chief, Jerome Powell, may emphasize policymakers remain steadfast in their fight against inflation, while opening the door to a smaller 50 basis point hike in December.
The Fed’s decision to press ahead with its supersized rate rises since March, is now widely being met with resistance – bringing officials to a crossroads on which path to take next.
In recent weeks, a long list of Wall Street banks and international organization from the United Nations, World Bank and IMF warned that an overly aggressive Fed tightening policy, combined with a surging U.S dollar – “risks breaking the financial markets and inflicting worse damage globally than the financial crisis in 2008 and the Covid-19 shock in 2020”.
According to Goldman Sachs, the Federal Reserve is now only “one or two rate hikes away” from unleashing a global financial meltdown.
Sooner or later the Fed will have no other option, but to pivot.
There is no deny that Wednesday’s decision will move the federal funds rate further into “restrictive” territory, meaning it will more forcefully stifle economic activity.
Some of the world’s leading economists warn that recent flashpoints in the UK economy, which forced the Bank of England to revert to back to unprecedented “Quantitative Easing” measures – offers a cautionary tale that the U.S central bank should not ignore.
As traders very well know – every rate hike, big or small – has enormous potential to move the markets significantly – bringing with it massive opportunities to generate huge profits fast!
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