Gold futures rise on weakened USA dollar

Gold futures rise on weakened USA dollar

Gold futures rise on weakened USA dollar

The paper speaks to a central debate facing the Fed right now: how to set rates when inflation doesn't appear to be accelerating and the unemployment rate is falling to levels that economists expect should push up wages and prices.

U.S. Federal Reserve Chairman Jerome Powell said on August 24 that the economy is strong and there was no clear sign of inflation moving above the central bank's 2 percent target. "It's easier for them to do their job if they're given independence and they don't have people harping at them politically".

The chairman's measured tone about the economy and his message that the Fed plans to stick with a gradual pace of rate hikes appeared to meet approval with investors. The rate hikes are meant to prevent the economy from overheating and inflation from accelerating.

Interest rate futures traders are pricing in a 98-percent chance of a rate hike at the Fed's September meeting, and a 68 percent chance of an additional hike in December, according to the CME Group's FedWatch Tool.

"While inflation has recently moved up near 2 percent, we have seen no clear sign of an acceleration above 2 percent, and there does not seem to be an elevated risk of overheating", Powell said.

He said Powell's speech indicated the Fed was flexible and didn't want to choke off growth by raising rates too fast.

In a speech today at the Fed's retreat in Jackson Hole, Wyo., Powell suggested the policymakers would stick to their schedule of slowly raising the key interest rate.

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On Wall Street, the Dow Jones Industrial Average rose 139.04 points, or 0.54pc, to 25,796.02. "But probably not that early, it's probably something like late this year, or next year". Trump was once again scolded by the press for criticizing the Fed a second time.

Trump believes that rate hikes would hinder economic growth and put a cap on the bullish USA stock market. -China tariffs boosted the greenback and the annual Federal Reserve conference in Jackson Hole, Wyoming began.

"Powell deliberately avoided commenting on the latest developments on trade policy, politics and risks from overseas", said Michael Pearce, senior US economist at Capital Economics.

This week, Trump complained in an interview with Reuters that he was "not thrilled" with Powell's Fed for raising rates.

Though Powell chose not to mention Trump's criticism, other Fed officials asserted that the president's complaints about rate hikes would have no effect on their policymaking.

Asked about the significance of this development, James Bullard, president of the Fed's St. Louis regional bank, says Fed officials had been wrong to dismiss recession warnings from inverted yield curves in 2000 and 2006. "Inflation has moved up and is now near the Federal Open Market Committee's (FOMC) objective of 2 percent after running generally below that level for six years". But Powell noted that there's a wide difference of opinion about it.

After the June rate hike, the Fed's policy rate now stands in a range of 1.75 per cent to 2 per cent.

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