This complete and utter capitulation by FED Chairman Jerome Powell has shocked many market participants, however, for those who have been closely following his statements since early December, it was quite predicable and you could see it coming.
The farce is over and the FED has proven that they are beholden to the markets demands, who not only desire lower rates, but need them to continue growth.
Interest rates, at least in the short to medium term are going to remain either unchanged, or decrease, anything else and the markets will revolt, resulting in a sharp collapse in prices that will make 2008 look like an opening act.
This is a sharp change in sentiment from just a few short months ago, when the majority of FED members were predicting that two interest rate increases throughout 2019 would be appropriate and needed.
Now, the Federal Open Market Committee has voted unanimously to leave rates unchanged, proving that the committee has discarded all hawkish intents and turned incredibly dovish.
As a result 10 year treasuries crashed to their lowest level in over a year, while the broader markets received the news positively, as rising rates would significantly impact consumers ability to spend.
In addition to the FED announcing that no further rate increases would be coming throughout the remainder of 2019, the FED also stated that they would not change their current stance unless something significant changed within the markets.
This change in stance came as positive news to President Trump and his administration, who have been in series of recent public disputes with the FED over its "raising rates" rhetoric.
The reasoning for this of course was the extreme volatility that the FED's hawkish talk was causing to the markets as a whole, causing sharp moves higher and lower.
Given how closely President Trump has tied himself to the rising stock markets, this of course caused him much grief, as a crashing market would not help his chances of a 2020 reelection and would look poorly on his presidency.
Unfortunately for President Trump, the reasoning that the FED has given to justify their drastic change in position is not good.
Despite one of the best job markets in decades, the FED has downgraded its economic forecast, reducing GDP growth expectations as they see a slow down in consumer and business investment spending in the first quarter of 2019.
What this means for precious metals and the markets as a whole is that at least for now, the punch bowel is going to remain full and the party is going to continue on.
Easy money is here to stay and thus real inflation is going to continue to move higher, ultimately resulting in a higher price in both gold and silver bullion when they inevitably break free from their shackles and soars higher, adjusting to the unfathomable fiat money that has been injected into the system.
- Source, as first seen on the Sprott Money Blog
