GOLD INVESTORS have a new interest-rate outlook to assess after the US Federal Reserve held its benchmark rate unchanged on Wednesday and released projections pointing towards lower rates during 2024.
The Federal Reserve maintained its target range at 5.25–5.50%, while noting that inflation had eased over the past year but remained elevated.
Policymakers said economic growth had slowed from its strong third-quarter pace. Employment gains had moderated but remained strong, and unemployment was still low.
The accompanying economic projections showed a median federal funds rate of 4.6% at the end of 2024, compared with 5.4% at the end of 2023.
The difference broadly corresponds to three quarter-percentage-point reductions from the current target-range midpoint. However, the projections represent individual policymakers’ assessments rather than a commitment to a particular schedule.
The median forecast for inflation, measured by the personal consumption expenditures price index, was 2.4% during 2024, easing to 2.1% in 2025 and 2.0% in 2026.
For gold, the prospect of lower interest rates is relevant because bullion does not generate interest income. Lower yields can reduce the opportunity cost of holding it, although exchange rates, inflation expectations and investor demand also influence prices.
The Fed continued to stress that future decisions would depend on economic and financial developments. It also confirmed that the reduction of its securities holdings would continue.
The latest projections therefore provide a possible path towards easier policy, while leaving the timing and extent of any rate cuts dependent on how the economy evolves.
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