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Gold steadies after hitting 2-wk high on Fed rate view

Gold steadies after hitting 2-wk high on Fed rate view

The United States of America and its self-named United States Dollar have been supported by fiscal policy changes resulting from closely watching world economies and the United States Dollar's involvement in them through the Federal Reserve Bank.

The Federal Reserve is raising its key interest rate and signaling confidence in the US economy's durability but plans to continue a gradual approach to rate hikes for 2018 under its new chairman, Jerome Powell. The markets may have heaved a sigh of relief knowing that the dot plot, as it is called, for 2018 remained unchanged at three rate hikes. Despite the stronger growth, lower unemployment rate and higher interest rate forecast, the inflation projection was the same. They said they expect to raise interest rates three times next year, an increase from the two increases in 2019 that they forecast in December.

The Fed raises interest rates, more US tariff announcements loom, and profits at Chinese banks are set to surge. The Fed asserted that part of the deviation from 2 percent reflects unusual price declines that occurred almost a year ago.

"If I venture a prediction, there might be a four rate hikes in 2018", Stern NYU Professor of Economics Nicholas Economides said Wednesday during an interview on FOX Business' "Countdown to the Closing Bell". In addition, the already historically low unemployment rate is seen falling even further, ending next year at a stunning 3.6 percent, according to the quarterly Summary of Economic Projections.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation.

"The economic outlook has strengthened in recent months", the Fed said in a statement.

Another factor that might have disappointed the markets could be the inflation projection.

Fed expected to lift interest rates at Powell's debut

USA gold futures GCcv1 for April delivery settled up $5.90, or 0.5 percent, at $1,327.40 per ounce.

The dollar changed hands at 105.91 yen in early Asian trade, down from 106.04 yen late Wednesday in NY and 106.33 yen in Tokyo late Tuesday. It will also be interesting to see how the Fed's communication evolves under Powell.

Trump on March 8 announced steep tariffs on aluminum and steel, and is expected to take more tough action against Chinese goods this week, but Powell said officials did not specify whether rising trade frictions could impact growth or inflation. Slightly contradictory, USA unemployment, which is now at 4.1 percent, is expected to ease to 3.8 percent before the end of 2018, down from the 3.9 percent forecast in December.

China also gingerly raised a key short-term interest rate.

ENERGY: Benchmark U.S. crude shed 37 cents to $64.80 per barrel in electronic trading on the New York Mercantile Exchange.

The Fed has indicated that it expects two further (0.25%) interest rate hikes this year, with faster rises in the pipeline in 2019.

The benchmark federal funds rate has been hiked to 1.50-1.75% from the 1.25-1.50% raised in December 2017. Wage growth appears to be improving, but the signs are mixed.

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