Fed Meets Again as Rate Decision Looms

Six months ago, Wall Street was beside itself with glee in the expectation that the Federal Reserve would soon begin to start cutting interest rates. Yet here we are nearly mid-year and, while other central banks have already started cutting rates, the Fed has yet to budge.

Other central banks seem to have come to grips with inflation, realizing that the vast amounts of monetary stimulus they pushed into the financial system from 2020 onward have forced inflation far higher than their 2% targets. Only the Fed seems not to have come to this realization.

For right now, other central banks seem to have put their 2% inflation rate targets aside, relying on time rather than their own monetary policy actions to combat inflation. They’re beginning to cut rates, preferring to stimulate their economies back to life rather than continue fighting stubborn inflation that just doesn’t want to seem to come down.

On this side of the pond, the Fed has to contend with the official narrative that the economy is doing incredibly well, a necessity for the upcoming election in November. So a rate cut and an acknowledgment that the US economy is facing some headwinds would ruffle some feathers over at the White House.

Even with the unemployment rate inching higher, and with inflation seemingly stuck above 3%, the Fed isn’t going to want to rock the boat with a rate cut. No matter how badly the headline employment data may overstate the health of the economy, the Fed is being forced for political reasons to look like it isn’t trying to sink President Biden’s reelection campaign.

Where the Economy Stands

Inflation is probably the biggest hindrance to the Fed’s ability to start cutting rates. While the strength of the economy is one area in which political factors play in, so too does inflation.

The Biden administration has taken it on the chin in recent years with regard to how out of control inflation has been. And if the Fed were to cut rates, the fear is that inflation could once again climb out of control.

There are three more Federal Open Market Committee (FOMC) meetings between now and the November elections: this week, the end of July, and mid-September. The Fed right now has to hope that it can keep holding rates steady for those next three meetings.

Inflation remains problematic, with rates remaining above 3%. Even with the new inflation numbers coming out this week, it’s unlikely that they’re going to dip below 3%, and the Fed has previously pledged that it wants to see sustained progress towards its 2% goal.

If the Fed decides to change course, it likely won’t do it without verbally warning markets first. So the likelihood of a Fed rate cut is unlikely even in July, since there are only two inflation reports coming out until then and thus no way for inflation to show sustained progress towards 2%.

The unemployment rate is now at 4% which, while higher than last year, is still fairly low by historical standards. But what most people don’t see is the reality behind the labor market.

For one thing, all job gains since 2018 have been due to jobs created for immigrants. Native-born Americans have actually seen a slight decline in jobs since then.

Then there’s the fact that many of the jobs created over the past several years have been part-time jobs, and many of those are being worked by people who already have other jobs. So rather than job creation being a sign of a strong economy, it’s actually a sign that Americans are overburdened by inflation and are being forced to work multiple jobs just to keep up.

But while most Americans understand how inflation has impacted us, and while we know just how much more expensive life has gotten over the past three years, the Fed still seems to be largely in the dark. It focuses on headline figures and doesn’t try to dig under the hood, leaving it liable to keep making the wrong decisions.

Protecting Your Finances

The question for most Americans is how they can protect their financial well-being given what’s coming down the pike. With fears of recession growing, and rate cuts more a matter of when rather than if at this point, the status quo won’t remain forever.

Right now you can park your money in US Treasuries, CDs, or even savings accounts and earn 5% or more interest, something that we haven’t seen in well over a decade. And while it’s nice to see that kind of near risk-free growth, once rates start to get cut, that gravy train will dry up.

Even worse is the fact that once rate cuts start, it’s likely going to be due to the fact that the economy is really turning south. When the Fed started cutting rates in 2001 and 2007, each of those preceded a recession.

So when the Fed decides to start cutting rates, whether it’s this year or next, there’s a very good chance that it could be followed in short order by a recession.

That’s why it’s important to start preparing for recession now, so that when it occurs, you’ll be prepared. And one way to do that is by buying gold.

Gold has been a popular safe haven asset and inflation hedge for centuries. It often performs well when the economy is not, such as during the 2008 recession and its aftermath, when gold gained 25% during the same period that markets fell more than 50%.

Many Americans have started to buy gold to protect their finances, whether it’s moving tax-advantaged savings into a gold IRA or buying gold coins and gold bars to store at home. And with so many gold products to choose from, there’s something out there for everyone looking to buy gold.

With over $2.5 billion in precious metals placements and over 6,000 5-star reviews from our satisfied customers, Goldco has worked hard to make itself one of the best and most trusted gold companies in the industry. We believe that everyone should be able to take advantage of the ability to own gold to protect their financial well-being.

If you’re worried about the direction the economy is headed, worried about inflation, or worried about recession taking a bite out of your finances, now is the time to start thinking about how gold can help you. Call Goldco today to learn more about all the gold buying opportunities available to you.