Markets Remain Steady as US Federal Reserve Decision Looms

Gold Prices

Gold prices have been fluctuating for the third day in a row as markets await the Federal Reserve's decision on interest rates. It is currently trading near $1,940 per ounce. This follows a sharp decline in the precious metal during the previous session, as fears of a banking collapse due to recent crises in the banking sector faded, especially after UBS bank's acquisition of its competitor, Credit Suisse, in a move that could calm market fears. US Treasury Secretary Janet Yellen indicated that the US banking system is becoming stable, but further steps may be necessary.

A Look at Inflation Data in the UK

In a move that surprised the markets, data released this morning in Britain revealed that the Consumer Price Index grew on an annual basis, exceeding expectations to record growth of around 10.4%, higher than the previous reading of 10.1%. Meanwhile, the core inflation index also grew by 6.2% during the same period, exceeding expectations and higher than the previous reading, which recorded growth at 5.8%. As a result of these results that exceeded expectations, the pound sterling saw a limited increase against the US dollar, trading near $1.226, up by around 0.44%. Tomorrow at 12:00 GMT, the Bank of England is expected to hold a meeting, with expectations for a 25-basis point interest rate hike.

What to Expect from the US Federal Reserve before the Meeting

Despite statements by the Chairman of the US Federal Reserve, Jerome Powell, during his testimony before Congress, stating that the bank is continuing its monetary tightening pace and that the final level of interest rates is likely to be higher than expected, the crises that have hit the banking sector have caused uncertainty in the markets about the next interest rate decision. There are two options on the table: raising the interest rate by a quarter percentage point while continuing to focus on controlling inflation or maintaining it to protect the banking sector from collapse. According to CME tool surveys, over 87% of respondents expect a 25-basis point interest rate hike, while nearly 13% expect it to remain unchanged. At present, the markets are in a state of cautious anticipation, waiting for the Federal Reserve meeting and Jerome Powell's speech after the meeting to learn more about the path of the next monetary policy.