With various conflicting signals from recent economic data points, the Fed is currently in an unenviable position ahead of its June 18th meeting.
While recent releases showing a declining GDP and lower inflation would typically support rate cuts, today’s JOLTs report shows the US Labour market is more buoyant than once thought, suggesting that rates should remain unchanged.
At least in part due to recent tariff announcements, the Fed remains cautious owing to fears of ‘stagflation’, in which both inflation and unemployment would remain high. Highlighting “heightened risks to both employment and inflation targets” as justification for leaving rates unchanged in their previous meeting, the Federal Reserve is now faced with the following dilemma:
- Leave rates unchanged, prioritise an otherwise buoyant jobs market and low inflation, but risk further economic contraction
- Cut rates, prioritise economic growth, but risk higher inflation and job market health
Under current circumstances, at least in some regard, both outcomes can be seen as supportive of silver pricing. While lower rates typically favour non-yielding assets like silver, leaving rates unchanged risks further economic slowdown, boosting market uncertainty, and, by extension, safe-haven flows into precious metals.
