Inflation data and jobless claims trigger interest rate cut
Several major U.S. economic reports released last week supported expectations of a Fed rate cut. The Consumer Price Index (CPI) rose 0.2% in August, in line with expectations. Core inflation rose 0.3%. The Producer Price Index (PPI) also rose 0.2%, reflecting easing inflationary pressures. Additionally, jobless claims data indicated the labor market is stabilizing and showing no alarming signs of weakness.
These reports have strengthened market expectations that the Federal Reserve (Fed) has room to cut interest rates without reigniting inflation fears. As a result, the CME FedWatch tool indicates a 57% chance of a 25 basis point rate cut at the upcoming Federal Open Market Committee (FOMC) meeting, with a 43% chance of a further 50 basis point cut. This would be the first Fed rate cut since 2020, which is expected to further support the rise in silver prices.
Silver ends the week on a strong note
By the end of the week, silver recorded a significant rally, with XAG/USD up nearly 10% to close at $30.72. Lower Treasury yields, a weaker dollar, and rising expectations of Fed monetary easing have kept silver prices higher. With inflationary pressures easing and central banks leaning towards lowering interest rates, the bullish outlook for silver remains unchanged.
