The Federal Reserve just confirmed its second interest rate cut of 2025 by another 25 bps, down to 4.00% earlier this morning. And here is the summary of the FED decision.
- Two dissents split the board: the FED Miran wanted a 50 bps cut, signaling urgency, and the FED Schmid is in favor of no rate cut. This raises the tensions on how divided the FED is on the rate decision.
- Quantitative tightening—a.k.a balance sheet shrinkage- will officially end on December 1st, which also means that the liquidity squeeze has reached a breaking point. This also aims to support jobs, even though inflation is not fully tamed. Or in even simpler terms, the FED still sees job risk.
- Dual mandate problem: inflation remains “somewhat elevated,” and downside risk to employment has risen.
Despite the rate cut, the market seems to hate today’s FED speeches, which drag the gold prices by almost 2%. This comes after the FED chair Powell said, “a further reduction in the policy rate at the December meeting is not a foregone conclusion.”, down the FED rate cut in December projection from more than 80% previously priced in to 60% the current one.
→ signs of lower rate cut probability → gold price down.
Looking Forward:
- The interest rate from the Bank of Japan and the European Central Bank later this week.
- US President Donald Trump and Chinese President Xi Jinping are meeting on the U.S.-China trade deal.
Extra:
The post below comes around 8 am in Cambodia time, which also raises some tension right before the meeting starts.
But if the meeting goes well → depreciate the gold price.
Bad meeting → appreciate the gold price.
