WASHINGTON, D.C. — The Federal Reserve is holding a policy meeting this week, where federal interest rates are expected to remain unchanged. This expectation for unchanged rates occurs while U.S. inflation recently climbed to 4.2%.

PGIM forecasts that the Federal Reserve will implement three interest rate increases of 25 basis points each this year. CME FedWatch data indicates a 41% probability that interest rates will remain unchanged through the end of the year. There is also a 42% probability of a single quarter-point hike and a 14% probability of a 50 basis point increase.

Traders have adjusted their expectations for a U.S. interest rate hike in December to 57%, a decrease from approximately 70% in the previous week. The U.S. Core Personal Consumption Expenditures price index currently stands at 3.3%.

Market Analyst Edward Meir said, "We have had a good run in gold prices ever since late Thursday on the Iran news." He added, "Markets are expecting no rate decreases this year. If Warsh signals that at least one cut could be on the table later this year, the dollar should decrease further and we could see another rally in gold. However, if he comes across as more hawkish on rates, gold could come under some pressure." Spot gold was priced at $4,322.99 per ounce, an increase of 0.4%.

Current credit card interest rates average close to 22%. Credit card annual percentage rates are typically tied to the prime rate, which is generally influenced by changes to the federal funds rate. PGIM also predicts three rate cuts next year and one final cut in 2028, which would lead to a terminal rate of 3.375%.