Investing.com – Federal Reserve members continued to view the recent slowdown in inflation as transitory and insisted that it would rise to the central bank’s target of 2% over the longer-term, according FOMC minutes released on Wednesday.
The minutes showed that the recent slowdown in inflation didn’t deter the Federal Reserve from its stance of raising rates gradually, as most members expect that inflation will rise to central bank’s target of 2% in 2019.
“The staff projected that inflation would increase further in the next couple of years, and that it would be close to the Committee’s longer-run objective in 2018 and at 2 percent in 2019” The minutes said.
The minutes also showed that most Fed members supported the idea that the U.S. economy was strong enough to manage additional rate hikes.
“The Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further”.
The Fed’s continued stance that the slowdown in inflation remains transitory and gradual rate hikes are appropriate supported an uptick in both the dollar and U.S. bond yields, adding to downside momentum in gold prices.
The dollar rose 0.19% to trade at 96.17 while the U.S. 10-Year pared losses to trade flat around 2.348.
Gold Futures, traded flat at $1,219.57.
Gold is sensitive to moves higher in both bond yields and the U.S. dollar – A stronger dollar makes gold more expensive for holders of foreign currency while a rise in U.S. rates, lift the opportunity cost of holding non-yielding assets such as bullion.