With inflationary pressures mounting in the United States, interest rate cut expectations frozen indefinitely, and uncertainty persisting due to regional conflicts and the trade war, the Federal Reserve finds itself facing an extremely difficult equation.
Joe Yarak, head of global markets at Cedra Markets, painted a detailed picture of the current US monetary landscape and the outlook for the global gold market in his interview with Business with Lubna on Sky News Arabia, based on market figures, his reading of the Federal Reserve minutes, and the positions of major central banks.
The Federal Reserve's independence in the face of pressure... and Powell maintains his resolve
Yarak noted that the most striking aspect of the US Federal Reserve minutes was the explicit warning regarding the institution's independence. He explained that President Donald Trump insisted on interfering in the central bank's operations, and that its chairman, Jerome Powell, was subjected to continuous pressure to alter monetary policy directions. However, according to Yarak, Powell stood firm and won this round against President Trump.
Yarak emphasizes that the Federal Reserve's independence is a cornerstone of the American and global economy, as the system is based on the separation of monetary policy from the directives of the executive branch. According to the analyst, the minutes of the Federal Reserve meeting also revealed a significant rise in inflation, along with prevailing market uncertainty, which Powell attributed in his statements to the repercussions of the ongoing war in the Middle East.
Warsh inherits the most difficult file... and interest is frozen until after 2026
Yarak believes Powell made no additional commitments at his last meeting, explaining this by his desire to leave the path open for his expected successor, Kevin Warsh, without binding him to any predetermined direction. The analyst estimates that Warsh will face a difficult task in lowering interest rates after taking office, based on the fact that three members rejected any indication of a rate cut.
Yarak bases his forecast on market figures, noting that oil prices are approaching $120 a barrel, which portends inflationary pressures that could push consumer prices above 3 percent, far from the Federal Reserve’s official target of 2 percent.
He believes that, in light of these data, the horizon will not witness any change in monetary policy from now until the end of 2026, noting that some research firms and major banks are now predicting the possibility of raising interest rates in the first quarter of 2027.
