The US Federal Reserve raised interest rates for the second time in three months on Wednesday (March 15). The move, which was widely anticipated by investors, brought an immediate silver price rise.
According to a statement, the central bank has decided to raise rates by 25 basis points to a range of 0.75 to 1 percent, up from the previous range of 0.5 to 0.75 percent. The Fed’s target is 2 percent.
“In view of realized and expected labor market conditions and inflation, the committee decided to raise the target range for the federal funds rate,” the Federal Open Market Committee said. “Near-term risks to the economic outlook appear roughly balanced.”
The silver price was steady at $16.92 per ounce ahead of the announcement. After the Fed’s statement was released, it jumped to $17.13, and was sitting at $17.32 as of 4.00 p.m EST.
Speaking at a news conference in Washington, Fed Chair Janet Yellen commented, “[t]he simple message is — the economy is doing well. The unemployment rate has moved way down and many more people are feeling more optimistic about their labor prospects.”
“Our decision to make another gradual reduction in the amount of policy accommodation reflects the economy’s continued progress,” she added. “Today’s decision is in line with that view, and does not represent a reassessment.”
Officials plan to continue their “gradual” approach to tightening monetary policy, and still expect to make three rate hikes by the end of the year. That is unchanged from December’s Fed meeting.
US stocks were mostly higher on Wednesday, as traders had priced in more than a 90-percent chance of a quarter-point rate increase, Reuters says. And, as mentioned, silver rose in tandem with gold on the back of the news.
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“Gold is rising because investors feel more confident that that Fed is not going to increase rates rapidly this year,” said Jeffrey Nichols, managing director at American Precious Metals Advisors and senior economic advisor at Rosland Capital.
Nichols added that even with the three rate hikes priced in this year, real interest rates are still expected to be negative, which is positive for the yellow metal in the long run. Silver, which consistently moves in the same direction as gold, should also be positively affected.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.