Fed Begins Easing Cycle, But Inflation Keeps Policy in Play
The Fed’s cut was fully priced ahead of last week’s decision. However, Chair Powell offered no forward guidance, citing uncertainty around inflation. The July core PCE index rose 2.9% year-over-year, the highest since February, and remains well above the Fed’s 2.0% target.
The updated Summary of Economic Projections showed inflation expectations remaining elevated through 2026, with core PCE forecast at 3.1% for 2025 and 2.6% in 2026.
This puts additional weight on Friday’s August PCE release. A print in line or above July’s level may limit the Fed’s ability to move again in October. Conversely, a weaker number would validate the current market pricing for another cut and keep the bid in place for silver.
Consumer Sentiment Will Test the Fed’s Confidence Narrative
The final read on the University of Michigan’s September consumer sentiment survey is also scheduled for Friday. The preliminary print showed a 4.8% decline in confidence, with long-run inflation expectations rising to 3.9%. The Fed tracks these numbers closely. A weaker final result could support further easing expectations, while stronger data may challenge the current rate view.
Industrial Demand Supports Market Structure
Outside policy expectations, silver remains supported by stable industrial demand. Key applications in solar panel production, electronics, and semiconductors continue to draw material off the market. Physical demand has also been consistent, supported by rotation out of gold and platinum as investors seek more attractive entry points.
Positioning and Key Levels
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