Gold prices in the global ratio have not changed much yet, as the Fed continues to reduce purchases of the number of bonds and talks about a three-fold increase in rates next year.
After the monetary policy meeting, the Fed expectedly left interest rates unchanged at zero; however, the central bank continues to adjust its monetary policy, recognizing the growing inflationary pressures.
According to some market analysts, gold investors are focusing on the Fed's interest rate forecasts, also known as dot charts, which differ from the September forecasts. The Committee believes that the Fed funds rate will be 0.9% next year, which indicates at least a three-fold increase in rates. This forecast is clearly higher than the September forecast of 0.3%.
The US central bank also forecasts interest rate hikes in 2023 to 1.6% and 2.1% by 2024, compared with previous forecasts of 1.0% and 1.8%, respectively.
The US central bank believes that the labor market will strengthen slightly in the next two years. The unemployment rate is expected to drop to 4.3% in 2021, compared with the September forecast of 4.8%. According to the 2022 forecast, the unemployment rate will be 3.5% compared to the previous forecast of 3.5%. Unemployment will remain at 3.5% until 2024, unchanged from previous forecasts.
But despite the fact that the Fed has acknowledged that inflation has turned out to be more stable than expected, the committee does not believe that it will become a serious problem next year.
Forecasts show that the personal consumer spending Index (PCE) will grow by 5.3% in 2021, compared with the September estimate of 4.2%. However, it is assumed that inflationary pressure will level off next year and grow by 2.6% compared to the September estimate of 2.2%.
According to the Federal Reserve's forecast, inflation will rise to 2.3% in 2023, compared with the previous estimate of 2.2%. And by 2024, the pressure on consumer prices will rise to 2.1%.
In addition, core inflation expectations, excluding unstable food and energy prices, will grow by 4.4% this year compared to the previous estimate of 3.7%. Next year, core inflation will rise by 2.7% compared with the September forecast of 2.3%.
Inflation is expected to rise to 2.3% in 2023, compared with the previous estimate of 2.2%. And in 2024, inflation will drop to 2.1%.
According to Michael Pierce, senior economist at Capital Economics, the Fed seems to be a little more aggressive than expected. The British research company noted that it expects a three-fold increase in rates next year, but Pierce added that this is unlikely. What's most likely is that the Central Bank will raise interest rates only from June.
