The Federal Reserve left US interest rates untouched on Wednesday, in line with market expectations, but Chair Powell pared back expectations of a cut in September
Interest Rate Cut Expectations Pared Back
The Federal Reserve left interest rates unchanged for the fifth consecutive meeting on Wednesday, but two policymakers disagreed with the decision. The FOMC voted 9-2 to keep rates at 4.25%-4.50% with governors Michelle Bowman and Christopher Waller calling for a 25-basis point rate cut. While the decision was in line with market expectations, Chair Powell’s post-decision press conference pushed back market expectations of a September cut, emphasizing a wait-and-see stance due to the unpredictable nature of the upcoming tariffs on the economy. Current market pricing suggests a 43% probability of a US rate cut at the September 17th FOMC meeting, compared to a 65%+ chance seen yesterday.
Trade Uncertainty Remains Ahead of Tariff Deadline
Jerome Powell’s post-meeting commentary focused on the uncertainty surrounding tariff policies and their potential impact on inflation. Chair Powell said Wednesday that the Fed is looking through tariffs while determining monetary policy moves, a cautious approach reflecting the Fed’s recognition that tariffs could influence the path of inflation in the coming months. Friday’s (August 1st) US tariff deadline is ‘firm’ with no more extensions according to recent commentary from US Commerce Secretary Howard Lutnick, although President Trump remains open to continued talks after the tariffs begin. Deals so far agreed include the European Union, Japan, the Philippines, Indonesia, Vietnam and the United Kingdom, while tariff negotiations with China have been extended to August 12th.
Gold Recovers Wednesday’s Late Sell-Off, Silver Under Pressure
Gold has recovered from Wednesday’s post-decision move lower, while silver remains under pressure. The US dollar is back in favour after this year’s heavy sell-off with the greenback now back at levels last seen over two months ago. With the multi-month downtrend now broken, the dollar looks set to move higher in the coming weeks keeping pressure on both gold and silver.
US Dollar Index – Daily Chart
Gold remains in a multi-month consolidation pattern and needs to break back above the 50-day moving average before it can retest its recent high. The longer-term backdrop for gold and silver remains positive, despite a stronger US dollar, with geopolitical uncertainty and heavy central bank buying underpinning the pair. The Russia/Ukraine war continues with neither side looking to back down, the Middle East remains volatile, while growing trade protectionism adds to global political and economic uncertainty.
Central Banks remain a driver of gold demand, according to a recent report from the World Gold Council, with global central banks adding a further 166t to their reserves in Q2 2025. In addition, Q2 gold demand was boosted by ‘a second consecutive quarter of hefty demand for global gold-backed ETFs’ while ‘Bar and coin investors also joined the fray, attracted by the rising price and gold’s safe-haven attributes. Two consecutive quarters generated the strongest first half for bar and coin investment since 2013’, according to the World Gold Council Report.
Future gains are likely to be more measured compared to recent price action. but gold’s recent all-time high and silver’s 14-year peak are likely to come under pressure in the coming months as tariff uncertainty recedes and interest rate cut expectations grow.
Gold – Daily Chart
Further reading: Fed leaves interest rates untouched – London Loves Business
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