XAU/USD Soars to Fresh Peaks After Fed Decision

Gold prices spiked following the Federal Reserve’s latest stance on rates and its updated dot plot. Expectations for 2025 growth are faltering under the weight of inconsistent U.S. policy moves. Powell admitted that predicting the fallout from tariffs is proving elusive. On Wednesday, gold climbed toward $3,050 in intraday trading as the Fed opted to hold rates steady at 4.5%. The central bank highlighted that 2025 growth forecasts are being dragged down by the Trump administration’s unpredictable tariff announcements—often posted on social media only to be walked back later. Consequently, the FOMC slashed its end-2025 GDP projection to 1.7%, a steep drop from December’s 2.1% estimate.

The median dot plot now projects an end-2025 interest rate of 3.9%, barely shifting from the prior meeting. Starting in April, the FOMC will ease the pace of its balance sheet reduction. Meanwhile, rate markets see over a 50% likelihood of a 25-basis-point cut in June, with traders assigning a 65% chance of at least that much—or more—by June 18.

Fed’s Powell: Inflation Still Lingers Above Target

Even with mounting threats to the U.S. economy—such as sluggish growth signals and fears that the nation’s erratic tariff approach might spark both renewed inflation and a downturn—Fed Chair Jerome Powell emphasized Wednesday that the economy still appears fundamentally sound. He signaled no urgency to deviate from anticipating at least two rate cuts later this year.

This stance aligns with FXStreet’s Fed Sentiment Index, which tracks policymaker rhetoric. While Fed speakers have increasingly flagged risks clouding the economic horizon, their collective tone leans slightly dovish yet hovers near neutral, reflecting a wait-and-see approach for more definitive data.