New Year 2012 KLCI Relly

The Federal Reserve may alter the language of its monetary policy statement at next month’s Federal Open Market Committee (FOMC) meeting in a move that could keep interest rates at record low levels for longer than previously anticipated.

This morning the Wall Street Journal reported that the Ben Bernanke-led U.S. central bank “could signal it is likely to keep short-term interest rates near zero into 2014 or beyond, to bolster the fragile economic recovery.” The rationale for the change stems from news that “Fed officials have grown increasingly uncomfortable with their August statement that they are likely to hold short-term rates exceptionally low at least through mid-2013. Some believe low inflation and high unemployment could warrant low rates for longer.”

While the Fed funds futures market – which the report points out – is currently forecasting a 50% chance that the Fed will not begin raising rates until January 2014, the aforementioned change to the FOMC statement would provide even more of a tailwind for the price of gold and other U.S.-dollar denominated asset classes.