#沃什听证会撞上CPI More than a month after Kevin Warsh took office as Chair of the Federal Reserve, and following one FOMC policy meeting decision and two public appearances, investors are still guessing whether the new chairman’s policy stance is more dovish or hawkish. Next week, he will attend the semiannual hearings of the House of Representatives and the Senate on Tuesday and Wednesday, respectively, giving the market another window to observe his policy thinking. Notably, 90 minutes before the start of the Tuesday hearing, the latest CPI data will be officially released, leaving Warsh with almost no way to avoid questions about the trajectory of U.S. inflation—boosting attention on this hearing substantially.

For the U.S. dollar, the biggest risk scenario is CPI coming in hotter than expected, but Warsh is still repeating in Congress the recent message that “inflation risks have eased somewhat.” Conversely, if asked related questions, Warsh has not ruled out the possibility of a rate hike in July, which would allow the dollar to continue the upward trend seen after the FOMC meeting.

At present, against the backdrop of Warsh-led policy adjustments and the market’s ongoing revision of rate-pricing logic, the direction of U.S. monetary policy has become the biggest downside variable for the gold market.

Since taking charge of the Federal Reserve, Warsh has consistently put price stability at the top of his policy agenda. The market has already priced in at least one rate hike this year, with the earliest timing in September. Analysts also note, however, that international oil prices have fallen sharply from their highs during the period of the Iran-U.S. conflict, and inflation pressure has eased at the margin, leaving room for Warsh’s hawkish remarks in the hearings to soften.

Robert Minter, investment strategy director at Aberdeen Standard Investments, said in an interview with Kitco News that the market is over-amplifying Warsh’s hawkish comments while overlooking the structural logic that supports gold over the long term. Many institutional clients he advises do not believe the Fed will implement tightening actions.

Minter said: “Institutional investment advisors do not agree with current market pricing. They do not think Warsh will stay tough, nor do they like the likelihood of rate hikes landing this year. Setting inflation aside, ahead of the election the Fed basically will not roll out tightening measures—this is a fixed policy tendency that is not affected by leadership changes.” He believes that at this stage, Warsh is mainly issuing hawkish signals to build policy credibility, rather than preparing a large-scale rate-hike cycle. Even if near-term gold price volatility increases, institutional clients still recognize the medium- to long-term allocation value of gold today.

Other central banks: almost a sure thing!

The Bank of Canada is expected to keep rates unchanged
At 21:45 on Wednesday, the Bank of Canada will release its rate decision and the Monetary Policy Report; at 22:30 on Wednesday, Governor Tiff Macklem and Senior Deputy Governor Rogers will hold a monetary policy news conference. The Bank of Canada will announce its rate decision on Wednesday. The market expects it to keep rates unchanged, with Governor Macklem continuing to worry about weak economic conditions. Although the jobs market has improved slightly and overall inflation has risen, economic growth remains weak, core CPI is stable, and with gains offsetting the post-conflict oil price pullback, upward inflation pressure has eased, so the central bank has no need to tighten quickly.

Macklem has repeatedly played down inflation risks, and the market is only pricing a 50% probability of a 25-basis-point rate hike by year-end.

In a report, ING analyst Francesco Pesole said the Bank of Canada is unlikely to bring any surprises, and the threshold to shift to a hawkish stance is high. Unless oil prices rebound to the level seen in April to May, the inflation outlook remains moderate, especially considering the downside risks to jobs and economic activity from uncertainty related to the (U.S.-Mexico-Canada Agreement). The policy cycles of the Fed and the Bank of Canada have diverged significantly, driving the Canadian dollar to fall to a 15-month low versus the U.S. dollar.