The FOMC Keeps Silver Alive

The recent FOMC meeting brought some short term optimism for the silver market mainly for iShares Silver Trust (SLV) as the FOMC appeared this time less hawkish than in previous meetings. Let’s review the latest statement, economic data and the potential ramifications of this news on shares of SLV.

Lower inflation slows down the pace of future rate hikes

The recent statement introduced new language that, at first glance, appears more hawkish: Even though the word patient was omitted, a rate hike next month still seems off the table:

“Consistent with its previous statement, the Committee judges that an increase in the target range for the federal funds rate remains unlikely at the April FOMC meeting”.

The committee appears to have taken a step back from previous meetings and is less determine to raise rates in the near term despite the improvement in the U.S. labor market and the expected lower unemployment rate in the coming years.

Regarding inflation: The fall in oil prices seem to have cut down projection of not only CPI but also core CPI: The current average outlook for this year’s core PCE was revised down to 1.35%; back in the December meeting it was 1.65%. For 2016, the core PCE also came down from an average of 1.85% to 1.7%. The FOMC also voiced its concern over the lower than previously estimated inflation over the next couple of year and its impact on the Fed’s decision to raise rates.

For the rest of the report you can see it at Seeking Alpha

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