Gold prices witnessed violent fluctuations during the past few moments, after the statements of a member of the US Federal Reserve, as prices have not yet settled on a specific destination, whether up or down.
Boston Fed President Susan Collins said there was “more work to be done” to bring down inflation and that while it was “probable that we will see at least some” credit tightening as a result of the recent banking turmoil, it will be important to watch the data.
“What history has told us is that you need conditions tight enough to suppress inflation, and that the Fed has to stay the course and not back down,” Collins said in an interview Friday on Bloomberg Television.
Collins spoke minutes after the latest reading on US inflation, which missed expectations.
The annual basic personal consumption expenditures price index recorded an increase of 4.6%, while experts expected it to rise by 4.7%, while it recorded 4.7% in the previous reading. The Fed aims to drop this number to 2% only.
On a monthly basis, the core personal consumption expenditures price index rose to 0.3%, after recording 0.5% last month, while experts had expected an increase of 0.4%.
As for the main personal consumption expenditures price index, on an annual basis, it increased by 5%, and it had recorded, in the last reading, an increase of 5.3%. On a monthly basis, it recorded 0.3%, less than expectations that expected it to rise by 0.5%.
Collins, who does not have the right to vote on monetary policy decisions this year, said on Thursday that more monetary tightening is needed to bring down inflation. She said the average forecast Fed officials provided in March was a good gauge of what she expected interest rates and the economy to be.
Interest pricing now
The markets are now pricing the interest rate at the meeting scheduled for next May, by raising the interest rate instead of fixing it, as the Fed’s follow-up tool on the Saudi Investing website shows that expectations changed to 55.8% in favor of raising the interest rate by 25 points, after it was 6% in the previous week. The tool also indicates that it has stabilized at 44.2%, up from 94% last week.
It rose from the previous day from 50.5% to 55.8% in favor of raising interest rates.
This shift in expectations came after a series of statements made by Fed members this week, the most recent of which was issued by Susan Collins.
Gold and the dollar now
Gold rose in spot transactions by 0.1% at $ 1982 an ounce.
While US gold futures rose 0.12% to $2,000.
The dollar index rose by 0.15%, to record 101.96 points.