However, eyebrows were raised by some of the changes in language that the Federal Reserve used during Wednesdays meeting, indicating that the rate cuts that we have recently come to expect, may be going by the wayside for the foreseeable future.
Interest rates now stand in the 1.5% to 1.75%, which is incredibly low, although still well above the negative rates that some of the United States major trading partners have adopted, such as the European Union who reside in negative territory.
Unfortunately for advocates of an easy monetary policy, the Federal Reserve made some notable changes in their language during Wednesday's meeting, removing the following talking point that appeared during the last few Fed meetings;
“
In its place, the Federal Open Market Committee has instead inserted the following line;
“The Committee will continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the federal funds rate,”
This is being taken by some as a much softer approach and an indication that rates will remain at this level, at least for the next few Fed meetings.
Going on to clarify, Federal Reserve Chairman Powell went even further, stating that central bank officials;
Of course, these hawkish lines of text infuriated President Trump, who has been on record stating that he believes the United States should be more competitive on the global stage and slash rates to the negative territory, just as the European Union has done.
The markets as a whole seem largely unconcerned with Powell's statements, likely indicating that they don't believe that the Federal Reserve is truly done with cutting rates, as both the DOW Jones and S&P 500 have had no significant movements since Wednesdays meeting in which the Fed took a more hardened stance on cutting rates in the future.
Gold and silver, however, have begun once again to rally, with the former retaking its $1500 USD per oz level and surpassing it, currently trading at $1512. 11 USD per oz.
Silver, meanwhile has also moved significantly higher in today's trading session, breaking through the $18 USD per oz mark, which is a major win for advocates of precious metals if it can hold above that critical price point.
Perhaps these moves are more reflective of another key piece of concerning news that was released by the Federal Reserve on Wednesday, in which they indicated that they would be exploring a 50 year bond for the first time ever.
This is very concerning and comes at a time when the Federal Reserve is actively engaging in the debt markets, propping up and keeping things running "smoothly", while the budget deficit also continues to widen, reaching $1 trillion.
I personally see the warning signs that are all around and the flashing red lights on the geopolitical global stage, that are indicating that not only is turbulence likely to remain, but worsen in the coming 1-2 years.
Therefore, I believe that the Fed, as it has been so many times in the past, is all talk. Interest rates will be cut again in this race to the bottom, they simply cannot afford to not compete in the ongoing race to the bottom, as countries around the world keep their rates historically low.
This is good news for long term, steady accumulators of precious metals, but bad for the world economy as a whole and savers of fiat money, as paper savings are going to continue to depreciate as more and more funny money is created out of thin air.
Central bankers cannot stop, they won't stop, this is all they know and when the next recession inevitably rears its ugly head, you can bet your bottom dollar that they are going to send the printing presses into hyper drive once again.
- Source, As first seen on the Sprott Money Blog
