Inflation Remains High, Fed Easing Threatened
Newsmaker.id - The Federal Reserve reaffirmed its commitment to achieving price stability in its semi-annual monetary policy report submitted to the United States Congress. The central bank stated its readiness to act decisively to ensure long-term inflation expectations remain contained around its 2% target.
The report stated that inflation has risen again throughout this year and remains above the Fed's target. Price pressures are driven by supply disruptions, rising energy prices, trade tariffs, and conflicts in the Middle East, which have contributed to short-term inflation expectations.
On the other hand, the United States labor market is considered relatively stable, with unemployment remaining low and labor productivity strong. Economic growth moderated in the first quarter, supported by increased business investment, although household consumption remains limited.
The June projections estimate PCE inflation at 3.6% in 2026, while core inflation is expected to reach 3.3%. The median interest rate projection is also at 3.8% by the end of the year, higher than the current range of 3.50%–3.75%. Market Impact
US Dollar: The Fed's firm statement has the potential to support dollar strength, as expectations of interest rate cuts could diminish.
Gold: Gold prices could potentially come under pressure if the dollar and bond yields rise. However, demand for safe haven assets due to the Middle East conflict could limit the decline.
US Bonds: Treasury yields have the potential to rise if the market considers the possibility of interest rates remaining high or being raised again.
Wall Street: Technology stocks and interest-rate-sensitive sectors could come under pressure due to higher funding costs and less attractive stock valuations. (CP)
