Federal Reserve December meeting notes policy rate closer to neutral, gold prices steady

The Fed's December monetary policy meeting notes,DBG Dunbo official websiteDespite the Federal Reserve's tougher tone due to persistently high inflationary pressures, the gold market continues to hold its ground.

After its last meeting in 2024, the Fed cut rates by 25 basis points, but hinted that it expects only two cuts in 2025. And in September, central banks predicted four rate cuts in 2025.

While inflationary pressures have eased over the past year, meeting notes show the central bank committee remains concerned about prices.

"While participants pointed to recent higher-than-expected inflation data and the impact of potential changes in trade and immigration policies, they expected inflation to continue moving towards 2 per cent, suggesting that the process could take longer than previously expected," the meeting notes said. "Some suggested that the disinflationary process may have stalled temporarily, or pointed to the risk of that happening."

"Almost all participants agreed that upside risks to the inflation outlook had increased," the meeting notes added.

The meeting notes also show that the central bank is questioning the extent to which monetary easing is needed while economic activity remains relatively strong.

"In discussing the outlook for monetary policy, participants indicated that the Committee was at or near a critical point for moderating the pace of policy easing appropriately," said the meeting notes. "They also indicated that if the data were consistent with expectations, inflation continued to decline persistently to 2 per cent and the economy remained near maximum employment, a continued gradual shift to a more neutral policy stance would be appropriate over time. Some participants argued that with the decision at this meeting, the target range for the federal funds rate was lowered by a total of 100 basis points, and that the policy rate is now significantly closer to neutral than it was when the Committee began policy easing in September."

The gold market took the hawkish tone in the meeting notes in stride and continued to stay in positive territory. New York gold futures ended the day at $2680.10 an ounce on Wednesday (January 8), up 0.64% on the day.

New York gold continuous daily chart

Beijing time on January 9, 10:12 New York gold continuously reported 2676.5 US dollars/ounce