On Wednesday, gold surged towards $3,050 during intraday trading following the Federal Reserve’s (Fed) latest interest rate decision, which kept rates unchanged at 4.5%. The Fed highlighted that growth projections for 2025 have been significantly impacted by the Trump administration’s unpredictable approach to trade tariffs—announcing them on social media only to later retract them. As a result, the Federal Open Market Committee (FOMC) has revised its end-2025 Gross Domestic Product (GDP) forecast down to 1.7%, a sharp drop from the 2.1% estimate made in December.
Furthermore, the median dot plot indicates that the expected interest rate for the end of 2025 remains at 3.9%, showing little change from the previous policy meeting. The FOMC has also announced plans to slow down its balance sheet reduction from April. Despite this, rate markets suggest a greater than 50% probability of a quarter-point rate cut in June, with traders pricing in a 65% chance of a quarter-point or larger cut on 18 June.
Fed Chair Powell: Inflation Still Somewhat Elevated
Although concerns are mounting over slowing economic growth and the potential for erratic US trade policies to drive both renewed inflation and a recession, Fed Chair Jerome Powell stated on Wednesday that the overall economic outlook remains stable. He emphasised that the Fed is in no hurry to move away from its current expectations of at least two further rate cuts later in the year.
This stance aligns with the overall sentiment of Fed policymakers, as measured by FXStreet’s internal Fed Sentiment Index. While officials have increasingly voiced concerns over risks to the US economy, the overall view remains slightly dovish but close to neutral as the Fed awaits clearer economic data.
