US Fed likely to keep rates unchanged with action expected in gold market post Powell’s speech

The US Fed’s FOMC meeting, scheduled for March 18-19, is set to conclude today, with the Fed expected to avoid rate cuts due to global uncertainty.

US recession has become a hot topic with real economic data and consumer sentiments both painting a negative outlook for the American economy.

Powell’s expected decision not to lower interest rates comes after both the Consumer Price Index (CPI) and the Producer Price Index (PPI) decreased in February. After all, Powell has been open in his view that he will not be in a hurry to cut rates.

Powell is not expected to cut rates aggressively as Trump tariffs are likely to reignite inflation in the economy. Reciprocal tariffs are likely to be effective April 2 unless Trump does it again – delay the date.

However, as of today, markets expect two to three rate cuts in the H2 2025. “The FOMC is anticipated to maintain the federal funds rate at its current range of 4.25% to 4.50%. This decision aligns with the Fed’s cautious approach amid economic uncertainties, particularly those arising from recent tariff policies,” says Narinder Wadhwa, Managing Director & CEO of SKI Capital Services.

Today, the Federal Reserve will also release its quarterly Summary of Economic Projections, which will include Fed official’s insights on the state of the economy and the likely direction of rates over the near future. The dot plot reveals the interest rate direction and the number of rate cuts expected ahead in 2025.

The decision by the US Fed chair Jerome Powell will be announced at 2 pm ET or 11.30 pm IST on March 19 and can be watched on the Official YouTube channel of the Federal Reserve.

Gold and Powell’s Announcements

While the equity market may not witness much volatility unless Powell surprises, it is the gold that could see some action post Powell’s press conference.

Gold price is highly sensitive to interest rates and the dollar. “If the Fed maintains rates, gold may see limited upside or a slight pullback, as higher yields make non-yielding assets like gold less attractive. If Powell signals rate cuts later in the year, the dollar could weaken, boosting gold prices as lower rates reduce the opportunity cost of holding gold,” adds Wadhwa.

Gold rate in US dollars per ounce crossed $3000 on March 15 and trades around $3030 now. Gold price today in India is Rs 89,090. Thanks to global uncertainty and the likely US Fed rate cuts in the second half of 2025, expect gold prices to reach higher levels.

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