Markets price in 41 bps of Fed tightening by year-end after the central bank signaled a potential rate hike in 2023.
Gold extended losses as the Federal Reserve’s hawkish dot plot revived rate hike expectations, lifting real yields and the US dollar. The Fed projected one more hike this year, defying consensus for no change, with 41 basis points of tightening now priced in for 2023.
Investors see a 36% chance of a July hike and a 74% probability for September. The shift follows Fed official Kevin Warsh’s remarks that markets should react to incoming data rather than anticipate Fed moves, reinforcing the central bank’s data-dependent stance.
Trump’s muted response on Truth Social, breaking from past criticism of Powell, added to the hawkish tone. Gold remains under pressure as traders await fresh economic data to gauge the Fed’s next steps.