What Rate Hike?

The Federal Reserve released the minutes from its September meeting this morning. In essence, it showed that although there is still a high probability of an interest rate hike in December, that rate hike is not etched in stone.

In fact, the minutes clearly illustrated that some Fed members were still on the fence as to whether or not they should implement one last interest rate hike in 2017.

This follows Chicago Fed President Charles Evans’ statement on Wednesday where he said that a December interest rate hike was not a done deal, according to a report in the Wall Street Journal.

Speaking to MarketWatch this morning, Brian Lundin, editor of the Gold Newsletter, said, “The Fed minutes confirmed what several Fed officials had been hinting at since the meeting - that the consensus support for a December rate hike isn’t strong or completely committed. This added bit of doubt as to whether there’ll be a December hike”.

More than one Fed official revealed that they believe it might take longer than they had previously anticipated to get inflation back to the central banks 2% target. These Fed officials also noted that “some patience” was warranted in hiking interest rates in order to assess trends in inflations, this according to the minutes released today.

Many Fed officials “noted that interpreting the next few inflation reports would likely be complicated by the temporary run-up in energy costs and the prices of other items affected by storm-related disruptions and rebuilding.”

That being said, according to the CME’s FedWatch tool, there is still an 86.7% probability that December’s FOMC meeting will result in a rate hike of 25 basis points (1/4 %).

Gold prices reacted in a positive manner following the release of Septembers FOMC meeting minutes, with gold futures currently trading up $1.00 at $1294.90 as of 430 EDT. This marks the fourth consecutive day where gold future prices have had a higher low, as well as the fourth consecutive day in which gold prices have closed higher

Spot gold is also trading up $4.90 and is currently fixed at $1292.40. According to the Kitco Gold Index (KGX) all but $0.10 of today’s upside move can be attributed directly to weakening US dollar.

Wishing you as always, good trading,