More Fed members mention the possibility of raising interest rates
US Federal Reserve (Fed) Governor Michael Barr on September 1 issued two policy scenarios depending on the diễn biến of inflation, including the possibility of raising interest rates if price pressure does not cool down enough.
Speaking at a forum in Washington, Mr. Barr assessed that the US labor market is still stable, the unemployment rate is relatively low and the economy continues to grow steadily. However, inflation is still too high and has maintained this situation for more than 5 years.
According to Mr. Barr, at the September meeting, the Fed will continue to discuss inflation prospects and policy positions.
If the data shows that inflation is falling towards the 2% target, he believes the Fed may spend more time assessing policy. Conversely, if inflation does not cool down enough, his view is that the Fed should "act decisively to raise interest rates".
This statement does not mean that the Fed has decided to raise interest rates at the next meeting. Right in his speech, Mr. Barr noted that the opinions given are his own, not necessarily representing his colleagues in the Fed Board of Governors or the Federal Open Market Committee (FOMC).
At the meeting at the end of July, Mr. Barr was in the group of 9 members who voted to keep the interest rate at 3.5-3.75%. At that time, three other members, Beth Hammack, Neel Kashkari and Lorie Logan, wanted to raise the interest rate by another 0.25 percentage points.
New signals from Barr appeared just days after Fed Chairman Kevin Warsh's speech at the Jackson Hole conference on August 28.
Mr. Warsh emphasized that the Fed's 2% inflation target is fixed, and said that the Fed needs to see sufficient evidence that core inflation is returning to the target at an appropriate pace. Otherwise, the Fed still has "work to do". However, the Fed Chairman also affirmed that he is committed to an operating principle rather than committing to a specific interest rate decision.
After the speech at Jackson Hole, the market strongly increased expectations that the Fed could raise interest rates. The market's probability of an interest rate hike in September increased from about 35% to 60% on August 28.
The next FOMC meeting will take place on September 15-16. 9.
Gold price loses more than 2%, to near-two-week low
At the same time, the world gold market experienced a sharp decline on September 1.
According to Kitco, in the US trading session, spot gold prices at one point fell to the lowest level since August 19. By the end of the afternoon of September 1 New York time, spot gold was traded around 4,327.7 USD/ounce, down 2.68% during the day.
By 8:38 PM on September 1st New York time, equivalent to about 7:38 AM on September 2nd Vietnam time, Kitco price list recorded spot gold around 4,328.3 USD/ounce.
The gold decline took place in the context of strong global bond market sell-offs, rising US government bond yields, and a stronger USD.
Kitco recorded the yield of 10-year US Treasury bonds on September 1st at around 4.79%, the highest level since January 2025. At the same time, the market continues to value about 66% of the Fed's ability to raise interest rates in September.
Oil prices rose sharply due to tensions in the Middle East, also increasing concerns about inflation. This is a rather unfavorable development for gold in the short term: High inflation may support safe-haven demand, but if it makes the market believe that the Fed must maintain or raise interest rates, rising bond yields will make the opportunity cost of holding unprofitable assets like gold greater.
In the coming days, the market will monitor more US jobs data, including the ADP private sector jobs report, the number of unemployment claims and especially the August jobs report. These data may continue to change expectations about the interest rate decision at the mid-September meeting and thereby affect gold prices.
