Fed’s Tarullo says doesn’t think rate hike should come this year
Spot gold was little changed at $1,157.70 an ounce by 0346 GMT, after gaining 1.6 per cent in the previous session.
With no data due from Europe today, attention will be primarily on the US again.
The U.S. Federal Reserve is considering whether to go ahead with the first rate hike in almost a decade when policymakers meet October. 27-28 and again on December. 15-16. Fed Governor Lael Brainard on Monday said the Fed should hold off on rate hikes until it is clear that trouble in China and other global risks will not push the US recovery off course. Money and hedge funds managers raised their bets to four month high, relying on expectations that the fed will delay the anticipated interest rate hike. Adding on, she said that even beyond this short term noise, the truth is that there hasn’t really been a big shift to gold and that there are still opinions about the Federal Reserve hiking the results eventually.
Panelists continue to expect the strong USA dollar and the economic slowdown in China to weigh on the us economy, while lower crude oil prices and monetary policy easing in Japan and Europe are expected to help.
“There is a bit of a disconnect and the market is telling the Fed that they don’t really believe there will be rate hike this year, which explains why the dollar is slightly weaker from last week”, said Bernard Aw, a strategist at IG Asia Pte in Singapore. Although the United States unemployment rate stands at 5.1 percent and prospects for improvement look good, he said the unemployment figure does not fully capture current labor market conditions in the U.S. as the labor force participation rate remains low, while there are also many Americans who want to work full-time but only manage to obtain part-time jobs.
Gold is being overlooked as central bankers prop up bond and stock markets with near-zero interest rates and bond purchases, according to Elliott Management’s Paul Singer.
Except that’s not been the case for the US economy.
Time and again this year, Yellen has said that she expects it will be appropriate to raise interest rates in 2015. Bullard, however, admitted it would be tough to raise rates in October since not much time has passed since the September meeting. Over the year, inflation was flat at 0%.
The Fed discussed concerns about the global economy when deciding to put up rates in its September meeting.