All eyes were on the Fed as Chair Jerome Powell read his prepared statement to the House Financial Services Committee on Wednesday. Market watchers have been chomping at the bit for an interest rate cut. And average Americans have been hoping for relief to sky-high prices. Powell’s latest announcement? Interest rate cuts are not coming yet. Inflation is still high above the 2% target and reaching that target is “not assured.”₁

With inflation staying put, what does this mean for your money?

Gut-Punched Purchasing Power

Wild inflation has left Americans feeling the pinch everywhere from the gas pump to home prices. The inflation rate is the percent of year-over-year cost increase of select goods and services. The target rate set by the US Federal Reserve has been 2% since 2012. In recent years, however, inflation has rocketed up to as high as 9.1%. This year, rates are still above 3% and appear to be trending up.₂

While rates have slowed from their lofty peaks, the increase continues. And the damage done remains. Inflation, after all, is a compound factor. Cumulative inflation since 2021 is a startling 18%. Jim Grant, Wall Street guru and interest rate analyst, notes, “Inflation is not transitory… It is permanent in that you will never regain the purchasing power you have lost to inflation.”_3,4

Attempts to Tame Inflation

In an effort to dampen inflation and tamp down spending, the Fed raised interest rates 11 times between 2022 and 2023. This sent consumer borrowing rates to 20-year highs to a standing range of 5.25%-5.50%. The combined effect of high interest rates with continued inflation left Americans in the lurch. “Many consumers are experiencing higher levels of economic stress compared to one year ago,” said Silvio Tavares, CEO of credit scoring company VantageScore._{5, 6}

After its December 2023 session, the Fed forecasted it would make three quarter-point interest rate cuts by the end of 2024. The goal: to lower the benchmark rate to 4.6%. Ever since, market observers have been keenly eyeing every movement for signs of rate reductions. However, three months into 2024, no cuts have materialized. Current projections paint a more cautious outlook as inflation remains stubborn.

Inflation Progress 'Not assured'

Inflation rates remain elevated in 2024. This deflates hopes that the Feds have price bumps under control. Fed Chair Powell says, “It will likely be appropriate to begin dialing back policy restraint at some point this year. But the economic outlook is uncertain, and ongoing progress toward our 2% inflation objective is not assured."₇

Persistent inflation is running well above the Fed's comfort zone of 2%. And it is showing stronger-than-anticipated vigor in the year's outset. This has recalibrated expectations. The likelihood of the initial rate cut is pushed further into the horizon to the Fed’s July 30-31, 2024 meeting.

Housing Hurdles

Housing costs are both affected by inflation, and included as a criteria in calculating the inflation rate. The housing market's reaction to soaring mortgage rates is a direct consequence of the Fed's monetary tightening. The average interest rate for a 30-year fixed mortgage is now 6.74%. The dream of homeownership slips further away for many Americans.₈

Meanwhile, rent prices are 29.9% higher than pre-pandemic levels. Single-family housing rents are up an astonishing 36.6%. And in February, rents continued to climb 3.5% higher than last year. This underscores the pervasive impact of inflation on various sectors of the economy. And nods to a vicious cycle that could keep inflation high.₈

A Call for Caution

Jeremy Schwartz, senior U.S. economist at Nomura Securities, encourages proceeding carefully. "Two months (of higher inflation readings) is too soon to declare that all is lost, but it certainly raises the risk that you have a little bit more of an inflation problem, and in that case it makes sense to be cautious. You have to consider the possibility that it will take a longer period of restrictive policy."₉

This cautious stance is echoed across various forecasts. A growing number of economists suggests that the Federal Reserve may actually scale back its rate cuts for the year to just two cuts of a quarter percentage points₉

A Favorite Hedge against Inflation: Gold, Gold, Gold.

Long viewed as an inflation hedge, gold glimmers in the gloom. Gold can protect against inflation because its cost in U.S. dollars varies. As the value of a dollar falls thanks to inflation, the price of every ounce of gold often goes up. That means you as the gold owner, in this scenario, are protected against the diving dollar. Your purchasing power stays strong.

That’s why, in an era of enduring inflation, gold can preserve your wealth. While interest rate hikes diminish purchasing power and inflation erodes the value of a dollar, gold can be a safe haven for protecting your assets. In today’s market, as in previous times of prolonged uncertainty, investors are flocking to the promise of safety offered by Gold and Gold IRAs.

Conclusion

Inflation continues to hold us in its grip and the Federal Reserve's policy response is not offering immediate relief. Against this uncertain backdrop, many experts encourage a reevaluation of financial strategies to ensure resilience. Gold emerges as an attractive option for investors seeking a hedge against inflation. American Hartford Gold is a trusted partner for those seeking to fortify their financial future with the timeless value of gold. To learn more about this appealing option, you can explore American Hartford Gold reviews.

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Max Baecker is the President of American Hartford Gold (AHG), the nation’s largest retailer of precious metals. He leads American Hartford Gold’s mission to help clients achieve long-term financial security with physical gold and silver.

Under his guidance, American Hartford Gold has delivered billions of dollars’ worth of precious metals to thousands of satisfied clients. He has significantly expanded the AHG workforce and opened a third office in Florida.

Max's dedication to upholding American Hartford Gold's industry-leading standards is reflected in its accolades. American Hartford Gold has made four high ranking appearances on the prestigious Inc. 5000 List of America’s Fastest-Growing Private Companies. AHG holds an A+ Rating from the BBB and a 5-Star Rating on Trustpilot with thousands of 5-star American Hartford Gold reviews. American Hartford Gold is the only precious metals company trusted and recommended by Bill O’Reilly.

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