Fed Chair: Driving down inflation towards target could take longer than expected
Fed Chair Jerome Powell said in a symposium earlier today that inflation has stiffened and held in its place during the first quarter, raising concerns about the prospects of interest rate cuts in 2024.
Powell added that it’s clear that recent inflation data didn’t give the Fed enough confidence that inflation is heading towards the target, and it could take longer than expected.
He said recent data shows strong economic growth and labor momentum, but little progress in bringing inflation towards 2%.
He asserted the Fed will hold onto its current policies until inflation sustainably approaches the targets.
Gold surpasses $2400 for first time ever
Gold prices rallied on Tuesday and scaled fresh record highs on strong haven demand, as global concerns mount.
Earlier US data showed industrial output rose 0.4% in March as expected, after falling 1.8% in the first quarter of the year.
US 10-year treasury yields rose by 4.5 basis points to 4.674%, after touching 4.696%, the highest since early November.
Two-year treasury yields rose by 2.5 basis points to 4.961%, while 30-year yields rose by 5 basis points to 4.788%.
San Francisco Fed President Mary Daly said there’s no urgent need to cut interest rates, warning from taking rash decisions.
Separately, the International Monetary Fund raised its global growth forecast by 0.1% to 3.2%, while expecting the US economy to grow by 2.7% this year.
The IMF expects the US to register an annual growth rate of 2.7%, up from 0.6% in latest forecasts.
Goldman Sachs’ analysts said in a recent memo that gold prices will likely reach $2700 by the end of 2024.
Otherwise, the dollar index rose 0.1% as of 19:50 GMT to 106.3, with a session-high at 106.5, and a low at 106.07.
Gold spot prices rose 1% to $22.9 an ounce as of 19:51 GMT to $2406.1 an ounce.
US stock indices edge lower, but Dow Jones ekes out gains
Most US stock indices lost ground on Tuesday with the exception of Dow Jones, amid a constant flux of corporate earnings results for the first quarter.
Earlier US data showed industrial output rose 0.4% in March as expected, after falling 1.8% in the first quarter of the year.
US 10-year treasury yields rose by 4.5 basis points to 4.674%, after touching 4.696%, the highest since early November.
Two-year treasury yields rose by 2.5 basis points to 4.961%, while 30-year yields rose by 5 basis points to 4.788%.
San Francisco Fed President Mary Daly said there’s no urgent need to cut interest rates, warning from taking rash decisions.
Separately, the International Monetary Fund raised its global growth forecast by 0.1% to 3.2%, while expecting the US economy to grow by 2.7% this year.
The IMF expects the US to register an annual growth rate of 2.7%, up from 0.6% in latest forecasts.
On trading, Dow Jones rose 0.1%, or 40 points as of 14:58 GMT to 37,775, while S&P 500 fell 0.3%, or 14 points to 5,047, as NASDAQ fell 0.2%, or 34 points to 15,850.
Oil prices hover near two-week lows as markets expect little response from Israel to Iran's attacks
Global oil prices fell in American trade on Tuesday, approaching two-week lows as the US now expects little response from Israel to the unprecedented Iranian attack on Israel soil.
Now traders await initial data on US crude stocks later today from the American Petroleum Institute, expected to show a buildup.
Prices
US crude prices fell 1% to $84.83 a barrel, with a session-high at $86.14, while Brent prices fell 1.05% to $89.56 a barrel, with a session-high at $90.80.
US crude rose 0.25% on Monday, while Brent rose 0.2%, away from two-week lows at $84.08 a barrel and $88.76 a barrel respectively.
Limited Israeli Response to Iran
Four US officials said to the NBC News network they expect the Israeli response to the Iranian attack to be limited, and will likely focus on striking Iranian surrogates outside Iran.
Israel’s war council convened on Monday to consider the response to Iran, which would be “imminent” according to military officials.
The Israeli Army’s leader Herzi Halevi thanks the US and Britain for helping strike down over 300 missiles and drones aimed at Israel.
Leaders of Britain, France, and Germany called Israel to avoid escalation following the Iranian attack, with US President Joe Biden asserting his country’s support for Israel, but asserted it won’t join a retaliation attempt against Iran.
US Stocks
The American Petroleum Institute will release initial data on US crude stocks later today, expected to show another buildup last week.
Analysis
RBC Capital Markets’ analysts believe the war will likely be contained if the Israeli government followed the advice of the US government and avoided an escalation.
The oil markets will remain on guard to monitor any such developments in the highly torn and war-driven region of the Middle East.