On January 28, the US Federal Reserve (Fed) decided to maintain operating interest rates, in the context that Fed Chairman Jerome Powell assessed that the US economy is in a "solid" state, while risks related to inflation and employment have decreased compared to before.
After a 2-day meeting, the Federal Open Market Committee (FOMC) voted with a ratio of 10 votes in favor, 2 votes against to keep the benchmark interest rate in the range of 3.50%-3.75%, as expected by the financial market.
Speaking at a press conference, Mr. Powell emphasized: "The economy once again surprised us with its strength.
According to the head of the Fed, internal consensus for this decision is quite broad, showing that the Fed is in a "good" position to assess when - or if it is necessary - to continue interest rate adjustments.
Since the policy meeting in December - when the Fed implemented its third consecutive interest rate cut - the economic picture has changed significantly. According to Mr. Powell, the risk of high inflation and the risk of job weakness have both decreased, although not completely disappeared. “We believe that policy is in the right position” - Fed Chairman said.
The press conference after the interest rate decision was quickly overwhelmed by questions surrounding the Fed's independence and Mr. Powell's personal future, in the context that the Donald Trump administration recently opened a criminal investigation targeting the Fed Chairman. Mr. Trump has repeatedly publicly criticized the Fed and Mr. Powell for not cutting interest rates sharply as desired to stimulate the economy.
Previously, Mr. Powell said that this investigation was aimed at putting pressure on the Fed to cut interest rates as the White House wished. However, at a press conference on January 28, he declined to comment further on this issue.
However, the Fed Chairman still sent a noteworthy message to his future successor. "Don't let yourself get caught up in the politics of elected officials" - Mr. Powell said, while emphasizing that the next Fed Chairman should be responsible for explaining to Congress, the agency that supervises the operations of the US central bank.
FOMC's policy statement did not give any specific suggestions on the timing of further interest rate cuts, only emphasizing that the level and timing of subsequent adjustments will depend on economic data and growth prospects. This expression was also reiterated by Mr. Powell in his speech.
According to Michael Pearce, US chief economist at Oxford Economics, the Fed is likely to maintain a "prolonged pause". "Interest rates are now close to neutral levels and the labor market is stable," Mr. Pearce said, predicting that as inflation - currently still about 1 percentage point higher than the Fed's target - continues to cool down, interest rate cuts could take place in June and September.
The gold market reacted strongly immediately after the Fed's decision.
In the morning trading session on January 29, world gold prices at 7:10 am (Vietnam time) traded at 5,505.12 USD/ounce, up to 420.16 USD, equivalent to 8.26% - the strongest increase in a day since the peak period of the COVID-19 pandemic in March 2020.
This breakthrough reflects the psychology of looking for safe assets that is spreading on the global market.
