In a major development this week, the Federal Reserve has conceded that its much-promised ‘soft landing’ following months of rate hikes was no longer realistic, opening the floodgates to a recession.
The recognition that economic pain is now inevitable to get inflation under control could well ignite a fresh bull run and puts gold back in control as a highly desirable safe haven asset.
Admitting that a recession was now on the cards as the Federal Reserve confirmed a third successive 75 basis point rate increase, Chairman Jerome Powell said, “The chances of a soft landing are likely to diminish to the extent that policy needs to be more restrictive, or restrictive for longer. Nonetheless, we’re committed to getting inflation back down to 2%. We think a failure to restore price stability would mean far greater pain.”
Following a policy meeting on Wednesday, the central bank also confirmed that further rate hikes will follow. Interest rates are expected to hit 4.4% by the end of this year and will continue to increase in 2023. Chairman Powell also indicated that rates won’t begin to fall until 2024, meaning the chances of a more prolonged, more painful recession are high.
“We have got to get inflation behind us,” Powell added in remarks to reporters following the monthly FOMC meeting. “I wish there were a painless way to do that. There isn’t.”
Analysts say that it’s clear that the economy is in for a rough ride – with an economic slowdown and job losses all but certain. Reacting to the Federal Reserve’s plan, Seema Shah, Principal Global Investors’ chief strategist, observed, “With the new rate projections, the Fed is engineering a hard landing – a soft landing is almost out of the question. Powell’s admission that there will be below-trend growth for a period should be translated as central bank speak for ‘recession.’ Times are going to get tougher from here.”
While markets are already weathering months of losses, this news couldn’t have come at a worse time for Wall Street. The timing couldn’t be better, however, for those ready to buy gold – with a window to opportunity open right now, it’s the optimal moment to follow expert advice to buy the dip. Doing so now means that your portfolio is future-proofed against the upcoming economic downturn, with the yellow metal historically performing strongly as a stable, safe, and reliable store of wealth during any recessionary period.
