Rates, inflation and the dilemma of the Fed
One of the biggest concerns arising from new rates is inflation. Higher import costs often translate into rising prices for consumers and companies. This puts the pressure on the Federal Reserve to increase the interest rates to curb the inflatory risks.
Currently, traders have priced in 36 basic points of the Fed rate for the year, against 42 basic points earlier. If the rates further burn inflation, the chance of deeper cuts will decrease, which could limit Silver’s benefit in the short term. Higher rates increase the opportunity costs of keeping non-building assets such as silver and gold, usually with roads on precious metals.
Currency market reaction and the prospects of Silver
The US dollar was reinforced after the rate announcement, with the Japanese yen, Canadian dollars and euro all weaken. A stronger dollar often acts as a headwind for silver, making it more expensive for international buyers. In the meantime, the Yuan of China slid past the level of 7.3 per dollar, which emphasizes the market unrest about possible trade disturbances.