In the second half of this year, at 2 AM tomorrow, the Federal Reserve's meeting resolution will be announced. Federal Reserve Chairman Powell will hold a press conference at 2:30 AM.
The market expects that the Federal Reserve may keep interest rates unchanged, using this time to assess the impact of Trump's policies on the U.S. economy. Currently, the U.S. economy is facing persistent inflationary pressures and increasing concerns about recession.
The new tariff measures introduced by the Trump administration, along with retaliatory actions from U.S. trading partners, have already weakened consumer confidence and raised Americans' expectations for future inflation. Since some tariffs were postponed shortly after being announced, the ultimate impact of the trade war on the economy remains unclear. This uncertainty may lead policymakers to adopt a wait-and-see approach, unwilling to commit to a specific policy path.
The market generally expects the Federal Reserve to maintain the benchmark interest rate in the range of 4.25% to 4.5%. Given recent data showing a slowdown in economic activity, the post-meeting statement may see slight changes. Powell's press conference will be the focus of market attention.
This week, in the so-called dot plot, the Federal Reserve will continue to hint at two rate cuts in 2025.
The Federal Reserve may soon slow the pace of asset maturities on its balance sheet, a process known as quantitative tightening (QT), or even completely pause this process (pause the balance sheet reduction) amid concerns that uncertainty over the debt ceiling may create friction in the Treasury market.
The minutes from the Federal Reserve's January meeting revealed that they discussed the potential need to consider pausing or slowing the quantitative tightening plan (which has been ongoing since June 2022) until lawmakers can reach an agreement before exhausting the government's borrowing authority. Adjustments to balance sheet policy may be announced in the coming months, possibly as early as this week.
On Tuesday, due to escalating tensions in the Middle East and concerns over President Trump's tariff plans, investor demand for gold as a safe-haven asset surged, pushing gold prices to a historic high of around $3,045.
Gold investors have also increased their bets, believing that the Federal Reserve will have to lower interest rates faster than expected this year, given the rising likelihood of recession due to the Trump administration's aggressive policies. Current market pricing indicates that the Federal Reserve may cut borrowing costs by 25 basis points at each of the monetary policy meetings in June, July, and October, further supporting gold prices. This week's meeting may provide clues about the future rate cut path, and Powell's monetary policy statement and comments will be closely scrutinized by investors, which will drive demand for the dollar and affect gold trends.
Recently, gold prices have broken and stabilized above the psychological level of $3,000, indicating that the minimum resistance direction for gold prices remains upward. Therefore, any pullback may be seen as a buying opportunity, as the Federal Reserve's rate-cutting cycle will continue to support gold prices.
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