Silver Price Falls on Fed Decision to Keep Interest Rates Unchanged

The US Federal Reserve hinted that it may raise interest rates in June if the US economy improves.

Federal Reserve

The silver price fell 1.78 percent on Wednesday (May 3), reaching $16.47 per ounce, after the US Federal Reserve decided to leave interest rates unchanged at 0.75 to 1 percent.

The impact of the Fed’s decision rippled through the market — all major indexes lost points except the Dow Jones Industrial Average (INDEXDJX:.DJI), which saw a slight increase. It closed up 8.01 points, or 0.04 percent, at 20,957.9 points.

The S&P 500 (INDEXSP:.INX) dropped by 3.04 points, or 0.13 percent, to close at 2,388.13 points, while the NASDAQ Composite (INDEXNASDAQ:.IXIC) experienced its largest drop in three weeks, falling 22.82 points, or 0.37 percent, to reach 6,072.55 points. The S&P/TSX Composite Index (INDEXTSI:OSPTX) was down 76.51 points, or 0.49 percent, and closed at 5,543.14 points.

A statement from the Federal Open Market Committee explains that although the labor market has strengthened, economic activity in the US has slowed. That said, committee members expect the slowdown to be “transitory.” Economic activity should expand at a moderate pace, while labor market conditions are seen building strength; inflation is expected to stabilize at around 2 percent over the medium term.

TD Senior Economist Michael Dolega said that moving forward, the Fed will be looking at Q2 data to determine if it will raise rates in the summer. 

“Should figures over the coming weeks confirm a rebound in consumer spending and inflation, we expect the Federal Reserve raise rates in June. Still, this is far from a done deal, and potential weakness could delay any hike further into the year,” Dolega commented.

According to the latest government estimates, the US economy grew by 0.7 percent during the January to March quarter, the poorest growth recorded in three years. Consumer spending stalled in March for the second straight month, and the Institute for Supply Management reported slower-than-anticipated growth in the manufacturing industry.

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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.

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