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The Federal Reserve's first battle of the year: When the "pause of interest rate cuts" meets Trump's tariffs, will gold hit a new high?
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Hello everyone, today XM Forex will bring you "[XM Group]: The Federal Reserve's first battle of the year: When the "pause of interest rate cuts" meets Trump's tariffs, will gold hit a new high?". Hope this helps you! The original content is as follows:
XM: The Federal Reserve’s first battle of the year: When the “pause of interest rate cuts” meets Trump’s tariffs, will gold hit a new high?
The Federal Reserve is about to hold its first interest rate decision of the new year in the early hours of Thursday morning Beijing time. Currently, economic growth is resilient, the stock market is close to historical highs, and inflation is above the target level. These factors all indicate that the Federal Reserve will suspend interest rate cuts this time. However, although interest rates are expected to remain unchanged, this resolution is a key meeting in the context of geopolitics, trade uncertainty, and high gold and silver prices, so the guidance to the market may be more www.xmtraders.complicated, focusing on the wording of Chairman Powell's monetary policy press conference.
With many Fed policymakers believing the central bank is currently at or near neutral policy, the case for stimulating the economy now is not strong — especially with fiscal policy set to begin this year and uncertainty about the impact of higher tariffs on prices.
Three major highlights of the resolution
Policy stance: Assessment of inflation and the economy. Will the Fed adjust its description of "stubborn" inflation and "resilient" economics?
Interest rate cut path: As for the hint of the next interest rate cut, in the face of the latest geopolitical situation, if Powell sends a more patient signal, it may mean that the interest rate cut will be postponed until later in the second half of the year.
Political pressure: The Fed’s statement of independence, Trump is looking for a new Fed chairman, and any discussion of political pressure affecting decision-making will cause market concerns. Trump previously attempted to fire Federal Reserve Board Governor Lisa Cook and launch a criminal investigation into Chairman Powell in an effort to influence the central bank's decision-making.
Trump’s recent tariff threats to Canada and Europe have been frequentIt will also be one of the key considerations in the Federal Reserve's decision, and it will also constitute uncertainty about the prospect of interest rate cuts. Because tariffs directly push up import costs. JPMorgan Chase analysis pointed out that existing tariffs have increased U.S. inflation by 0.3% to 0.5%. If the new threat materializes, it may re-intensify inflationary pressures. The Fed will be in a "dilemma." If tariffs push up inflation, high interest rates should be maintained; but if they hit the economy and consumption, interest rate cuts will be needed to support them. The Fed is likely to emphasize "reliance on data" and remain on the sidelines, and policy uncertainty will increase.
Currently, financial markets expect that the Federal Reserve may still cut interest rates twice this year (and the general view among Fed policymakers last month was that there may be only one more rate cut in 2026), unless the economic outlook is put at risk by a sharp deterioration in the tariff situation. Some officials have previously said they want to see more economic data on inflation and the labor market before cutting rates further. The current futures market has lowered its full-year interest rate cut expectations to only 44 basis points, and it is expected that the next interest rate cut will not be fully reflected in market prices until July.
How will financial markets react?
U.S. stocks (in earnings season): Facing the tug of war between "macro narrative" and "micro performance", an unexpected "hawkish" statement from the Federal Reserve or news of new tariffs could easily trigger profit-taking and market volatility, especially this week when Microsoft, MetaPlatforms, Tesla and Apple announced their results.
Short-term volatility in gold, which has repeatedly hit new highs, may intensify. If the Federal Reserve releases a stronger "hawkish" signal, it may trigger a technical correction. If Trump softens his tariff rhetoric, risk aversion may also temporarily cool down. However, the structural factors driving the bull market have not changed: the central bank continues to purchase gold, hedging "fiscal dominance" risks, and geopolitical uncertainty. Goldman Sachs has raised its year-end gold price target to $5,400.

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In short, the core of this meeting is to see how the Fed assesses and responds to an environment of "increased uncertainty." If the Fed continues to adopt a neutral stance without adding new views, and at the same time emphasizes patience and downplays the risks posed by tariff policies, U.S. stocks will temporarily focus on the performance guidance of heavyweight technology stocks. Gold and silver are currently gaining momentum. If the Federal Reserve does not express a particularly prominent position, the upward momentum of precious metals will continue to advance, and gold will continue to focus on higher levels of $5,200 to $5,300.
The above content is all about "[XM Group]: The Federal Reserve's first battle of the year: When the "pause of interest rate cuts" meets Trump's tariffs, will gold hit a new high?" It was carefully www.xmtraders.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
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