Fed Chairman Defies Pressure Again

The US Federal Reserve (Fed) has just concluded its two-day monetary policy meeting (June 17-18) with the decision to keep the benchmark interest rate in the range of 4.25% - 4.5%, maintaining a stable level from December 2024.

Approved by the Federal Open Market Committee (FOMC), this decision reflects the Fed's caution in the context of the US economy facing the risk of stagflation - slow growth combined with high inflation.

The Fed's decision was predicted by the market and went completely against the expectations of US President Donald Trump.

Mr. Trump is concerned that the interest costs on the huge debt will cause the US public debt to continue to increase sharply. The economy will be under further pressure as Washington is implementing many strong policies, including imposing high tariffs on goods from many countries.

Also at the Fed meeting, the “dot plot” chart - a tool showing Fed officials' expectations for future interest rates - showed that the Fed still expected two interest rate cuts in 2025, but reduced its adjustment expectations in 2026 and 2027 to a total of four cuts, equivalent to a decrease of 1 percentage point.

The main reason the Fed is not in a hurry to cut interest rates is concern about persistent inflation and a weakening economic outlook. The Fed forecasts US GDP to grow by just 1.4% in 2025, 0.3 percentage points lower than its previous forecast, while the PCE inflation index is revised up to 3%, with core PCE at 3.1%. The unemployment rate is also forecast to increase slightly to 4.5%.

Signs of a slowdown in the US economy, including falling retail sales, high initial jobless claims, and a 9.8% drop in housing starts in May, have made the Fed even more cautious.

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World gold prices fell sharply, USD rose as the Fed delayed interest rate cuts. Photo: HH

The Fed’s decision had a strong impact on global financial and commodity markets. The world gold price immediately plummeted, from nearly $3,400/ounce last night (Vietnam time) to below $3,365/ounce in the early morning of June 19 (Vietnam time), before recovering slightly to $3,380/ounce at 8:00 a.m. the same day.

The decline reflects investor disappointment as the Fed shows no signs of immediate monetary policy easing, causing gold - a safe haven asset - to lose some of its appeal.

Meanwhile, WTI crude oil prices rose sharply, surpassing the $75/barrel threshold, mainly due to geopolitical tensions in the Middle East following Israeli airstrikes on Iran. However, this increase was under pressure when the Fed expressed concerns about the US economic outlook, raising concerns about global oil demand.

In addition, Mr. Trump's statement that Iran wanted to negotiate on its nuclear program after 6 days of conflict has somewhat eased tensions, contributing to restraining the rise in oil prices.

US stocks were also negatively affected, with major indexes falling slightly. The S&P 500 lost 0.3%, the Nasdaq fell 0.2%, and the Dow Jones Industrial Average fell 0.4% in trading after the Fed's announcement. Investor sentiment turned cautious as the Fed signaled it would not rush to cut interest rates, given high inflation and signs of a weakening US economy.

What is the outlook for the US and global economies?

Ahead of the meeting, President Trump publicly criticized Fed Chairman Jerome Powell, calling him a “stupid man” and suggesting that interest rates should be cut by at least 2 percentage points to reduce the financial costs for the United States, which currently has a federal debt of more than $36 trillion.

However, Mr. Powell and the FOMC have ignored political pressure, asserting that the Fed's decisions are based on economic data and a commitment to independence in monetary policy.

The Fed’s decision to keep interest rates unchanged reflects a challenging economic picture for the US. With forecasts for slow GDP growth (1.4%) and high inflation (3%), the Fed is facing the risk of stagflation – a difficult scenario that requires a delicate balance between controlling inflation and supporting growth.

Recent data, such as rising long-term unemployment and weakening personal spending, suggest the Fed may be forced to act if economic conditions continue to deteriorate. The possibility of a rate cut by the end of 2025, as the “dot plot” suggests, remains open, but the timing will depend on inflation and labor market developments.

The Fed’s power, especially Chairman Jerome Powell, continues to be asserted by overcoming pressure from President Trump. Previously, Mr. Trump declared that he wanted to become Fed Chairman himself or nominate a replacement for Mr. Powell (whose term ends in May 2026).

In terms of market prospects, gold prices are likely to face short-term pressure if the Fed maintains high interest rates, as gold is often less attractive when investment opportunity costs increase. However, in the event of a significant weakening of the US economy or an escalation of geopolitical tensions, this is still a safe haven asset and can recover strongly.

WTI, while supported by Middle East unrest, faces downside risks if global demand weakens as the economies of the US and China, the two largest oil consumers, slow. Iran’s willingness to negotiate could also ease tensions, pushing prices lower.

The US stock market is likely to be volatile as interest rate-sensitive sectors, such as real estate and technology, could come under pressure if the Fed continues to delay rate cuts.

Domestic gold price decreased

Today, the world gold price weakened. At 3:55 p.m. today (June 19, Vietnam time), the world spot gold price was at 3,367.79 USD/ounce, down 27.21 USD/ounce compared to last night.

Following the same trend, domestic gold prices were also adjusted down.

SJC gold bar price is trading at 117.4-119.4 million VND/tael (buy - sell), down 200 thousand VND/tael in both buying and selling compared to yesterday's closing price.

The price of 1-5 chi SJC gold rings is listed at 113.5-116 million VND/tael (buy - sell), down 200 thousand VND/tael in both directions compared to yesterday's closing price.

The price of 9999 gold rings at Doji is at 114.5-11.65 million VND/tael, down 500 thousand VND/tael in both directions compared to yesterday's closing price.

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Source: https://vietnamnet.vn/chu-tich-fed-vuot-qua-ap-luc-tu-ong-trump-gia-vang-lao-doc-2412876.html