The US Federal Reserve cut the Federal Funds Rate by 25 basis points on Sept 17. The first rate cut in nine months places rates in the range of 4% to 4.25%, the lowest since late 2022.
In a speech to business leaders in Providence, Fed chair Jerome Powell shared his view that current policies are moderately restrictive, which leaves the Fed in a good position to respond to economic needs.
However, Powell also stated that he continues to see two-way risks posed by potential worsening inflation and employment conditions ahead, indicating there is no risk-free path forward for rates.
Chen Weiheng, global investment strategist at J.P. Morgan Private Bank notes that commentary from other Fed members did not completely align with Powell’s Sept 23 speech at the Greater Providence Chamber of Commerce 2025 Economic Outlook Luncheon.
Chicago’s Austan Goolsbee shared that the Fed should act carefully going forward despite his belief that the neutral rate should likely be lower than current levels. Meanwhile, Fed Vice Chair for Supervision Michelle Bowman’s comments were more dovish, and she warned that the Fed should act decisively to avoid falling behind the curve, writes Chen in a Sept 25 note.
“While Powell’s commentary did not offer a clear timeline of rate cuts going forward, we continue to expect the Fed to deliver rate cuts ahead should we see further weakness in US economic conditions,” says Chen.
See also: Why investors can’t seem to get enough of gold
Gold, in particular, “typically performs better in a lower interest rate environment”, notes Chen. “Lower yields decrease the opportunity cost of holding a non-interest-bearing metal. With the recent rally, investors could consider structured notes for better entry points into gold.”
Chen says he is “not surprised” by gold’s outperformance this week, and he continues to see gold “making new highs ahead”, with a mid-2026 outlook of US$4,050 to US$4,150 per oz. This is up from some US$3,760 currently.
