Gold (XAU/USD) Sentiments | Jerome Powell on Inflation | Forex Market

Gold prices have surged to the next target of $2435. Should gold breach this level, it is expected to retest $2450. This movement coincides with the release of the Empire State Manufacturing Index, which came in lower than expected. Additionally, core retail sales and retail sales data are set to be released today, which could further impact market dynamics.

Jerome Powell's Remarks on Inflation and Interest Rates

Federal Reserve Chair Jerome Powell recently stated that the second-quarter economic data has provided policymakers with greater confidence that inflation is on track to reach the central bank’s 2% goal. This development potentially paves the way for near-term interest rate cuts. Speaking at the Economic Club of Washington DC, Powell emphasized that recent inflation readings have contributed to this increased confidence, although he did not specify a timeline for rate reductions.

Powell highlighted that, while the first quarter did not boost confidence, the three latest inflation readings in the second quarter have had a positive impact. He also noted a shift in the Fed’s focus toward balancing potential risks to the labor market with their ongoing efforts to control inflation.

Balancing Inflation Control and Labor Market Stability

“We didn’t gain any additional confidence in the first quarter, but the three readings in the second quarter, including the one from last week, do add somewhat to confidence,” Powell said during his interview with David Rubenstein.

With inflation coming down and the labor market cooling off, the Fed will be closely monitoring both mandates. The central bank has maintained borrowing costs at their highest level in over two decades for the past year, aiming to reduce inflation without causing significant harm to the jobs market. While the labor market has been resilient, recent trends show a gradual rise in the unemployment rate, now at its highest level since 2021. These signs of labor market softening, coupled with improving inflation data, strengthen the case for the Fed to consider lowering its key policy rate soon.

Powell described the labor market as “no longer overheated” compared to earlier in the post-Covid-19 recovery and suggested that any unexpected weakening could prompt a response from the Fed.

Summary:

Federal Reserve Chair Jerome Powell's recent remarks highlight increased confidence in achieving the 2% inflation target and suggest possible near-term rate cuts. As the labor market shows signs of softening, the Fed aims to balance inflation control with economic stability.