One expert says now that the Fed has laid out its plan to fight inflation, gold prices have a clear path to new highs. Fed officials plan to raise interest rates by 25 basis points, with seven rate hikes in total. They also announced a slower growth forecast and increased inflation expectations for 2022. However, George Milling-Stanley, Chief Gold Strategist at State Street Global Advisors, told Kitco News that shouldn’t frighten the gold market. “If indeed the Federal Reserve does follow through with its plan that will put interest rates at 1.75% by the end of the year,” he said. “Interest rates will remain under 2% this year. I don’t think markets have much to worry about.” However, not all Fed officials agree with the plan. St. Louis Fed President James Bullard argues the Fed should raise rates 12 times and would like to see the central bank’s benchmark interest rate boosted above 3%.
Kitco News/Neils Christensen
Gold price has a path to $2,200 after Fed revealed its strategy – SSGA’s Milling-Stanley
The Federal Reserve has laid out a clear tightening path, and now gold prices are free to push to new highs above $2,000 an ounce as inflation will remain a clear threat to consumers, according to one market strategist.
In a telephone interview with Kitco News, George Milling-Stanley, chief gold strategist at State Street Global Advisors, said Wednesday’s monetary policy decision was slightly more hawkish than he expected; however, he added that it was a lot more dovish than market outlook.
As expected, the Federal Reserve raised interest rates by 25 basis points. At the same time, it signaled that it could start reducing its balance sheet at the next meeting. The central bank also updated its economic projections, lowered its growth forecast and raised its inflation expectations for 2022. Finally, the central bank also sees the potential for seven rate hikes this year.
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St. Louis Fed’s Bullard says the central bank should raise rates above 3% this year
St. Louis Fed President James Bullard said Friday he thinks the central bank should raise interest rates the equivalent of 12 times this year to convince the public it is serious about fighting inflation.
As the lone dissenter at this week’s Federal Reserve meeting, Bullard said in a statement that he would like to see the central bank’s benchmark interest rate boosted above 3% from the near-0% level where it had stood.
“This would quickly adjust the policy rate to a more appropriate level for the current circumstances,” he said.
Following its two-day meeting, the Federal Open Market Committee on Wednesday said it would raise overnight rates for banks by 0.25 percentage point, historically the typical increment with which the FOMC moves. Accompanying economic projections indicated a path this year that would see the equivalent of seven rate hikes, or 1.75 percentage points.
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CNN Business/Jeanne Sahadi
How to take advantage of rising interest rates
As expected, the US Federal Reserve on Wednesday hiked its key short-term interest rate for the first time since 2018.
The central bank is expected to raise rates several more times this year, but in small increments. Since those hikes are coming off a 0% rate today, by early 2023 the US economy is still likely to be operating in a fairly low rate environment, relatively speaking.
“When we talk about rates going up, they’re returning to pre-pandemic levels — the Fed is slowly reversing the cuts they put into effect in 2020,” said Greg McBride, chief financial analyst at Bankrate.com.
Once they do, McBride added, “they may have to go higher than that to tame inflation.” But he doesn’t expect that to happen this year.
Here are a few ways to situate your money so that you can benefit from higher rates, and also protect yourself from their negative effects.
You can read the full article, here.