Fed Members Speak Before the Blackout Period Begins Prior to the Next FOMC Meeting

The First FOMC Meeting of the Year Is Getting Closer

The first FOMC meeting of the year will begin on Tuesday, January 31, and conclude on Wednesday, February 1. While there has been some chatter by a few Federal Reserve officials suggesting that the Federal Reserve should raise rates by more than 25 basis points, it is highly anticipated that is exactly what will happen at the end of the FOMC meeting on February 1.

It is widely expected that the Federal Reserve will slow the pace of rate hikes with another 25-BPS rate hike. According to the CME’s FedWatch tool, there is a 99.2% probability that the Federal Reserve will raise rates by 25 basis points at their next meeting. However, officials at the Federal Reserve have not come to a unanimous decision regarding the pace of rate hikes. While most Fed officials seem to be united around Chairman Powell’s framework, others believe a more hawkish policy is necessary.

Members including Cleveland Fed President Loretta Mester and James Bullard continue to advocate a larger rate hike, others are believed to be backing rate hikes at a slower pace. Both Lorie Logan and Patrick Harker are in favor of slowing the pace of rate hikes. New York Fed President John Williams said that “monetary policy still has more work to do” to return inflation to 2%.

According to a poll by Reuters News, 80% of the forecasters (68 of 83) included in the poll believe that if inflation continues to decline the Federal Reserve will raise rates by 25 basis points at the next two FOMC meetings and then likely hold interest rates steady for at least the rest of the year.

Slower Rate Hikes, Higher Gold and Silver

This sentiment that the Fed will now slow the pace of rate hikes continues to stoke the bullish market sentiment for gold and silver. Today gold futures had modest gains with the February futures contract currently fixed at $1928.70 after factoring in a gain of $4.60. The most active March silver futures contract gained 0.86% and is currently fixed at $24.075

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Wishing you as always good trading,

Gary S. Wagner