The Bank of Russia unexpectedly maintained its key interest rate at a record-high 21% , defying analysts’ expectations of another significant hike as inflation remains stubbornly elevated. The decision marks a shift toward a more measured approach in balancing economic growth and price stability. Key Details Inflation Concerns: Annual inflation climbed to 8.9% in November, well above the central bank’s 4% target , with inflation expectations reaching 13.9% in December. Policy Rationale: The central bank cited the significant tightening of monetary conditions after October’s 200-basis point hike as sufficient to resume disinflationary processes. Governor Elvira Nabiullina emphasized avoiding both economic overheating and severe slowdowns. Economic Overheating: Elevated government spending on the war in Ukraine and social programs, coupled with labor shortages and rising wages, have fueled strong domestic demand, exacerbating price pressures...
Gold prices remained steady on Wednesday and are on track for a monthly gain, buoyed by increasing optimism about potential US interest rate cuts. Traders are now focusing on the Federal Reserve's policy decision due later in the day.
Key Highlights:
Gold Prices: Spot gold held firm at US$2,407.85 per ounce as of 0200 GMT, showing a gain of over 3% for the month. US gold futures slightly rose by 0.1% to US$2,405.60.
Federal Reserve: The Fed is expected to keep rates steady at the end of its two-day meeting. However, market participants anticipate signals towards a rate cut in September.
- Kyle Rodda, a financial market analyst at Capital.com, said, "The market wants to hear a confirmation that a September cut is on the cards and it will be the beginning of a policy easing cycle. Gold will rally if the Fed language indicates that multiple cuts are coming."
US Rate Futures Market: Fully priced in a 25-basis-point cut for September. Lower interest rates generally benefit non-yielding bullion.
Upcoming Economic Data: Traders are also eyeing the ADP employment report due later today and the US payrolls report on Friday. Recently, data showed US job openings fell by 46,000 to 8.184 million by the end of June.
Geopolitical Tensions:
US Strike in Iraq: The United States conducted a strike in Iraq in self-defense amid rising regional tensions following an Israeli airstrike in Beirut that reportedly killed Hezbollah's top commander.
Rodda added that significant escalation in geopolitical tensions, especially on Israel's northern border, could boost the safe-haven demand for gold.
Other Metals:
- Spot Silver: Increased by 0.2% to US$28.44 per ounce.
- Platinum: Gained 0.7% to US$966.13.
- Palladium: Rose by 1% to US$898.13. Both platinum and palladium are set for monthly declines.
The market's attention remains sharply focused on the Federal Reserve's signals regarding future interest rate cuts, which could significantly influence the trajectory of gold prices moving forward.
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