The Federal Reserve's independence has been redefined recently, and the inflation center has begun to change, becoming the core theme dominating global macroeconomic markets.

This article focuses on three core issues of the Federal Reserve: policy independence, the medium- to long-term trend of inflation, and market communication mechanisms. Combining the latest Supreme Court rulings and inflation data, it dissects the underlying logic of the current Fed policy framework and its practical impact on gold prices.

Policy stance: The Federal Reserve's independence has been strengthened, and inflation concerns have been reduced.

The core foundation of the Federal Reserve's monetary policy lies in the independence of policy-making, which means that the power to set interest rates is entirely determined by professional economic data, rather than by administrative or political intervention.

The U.S. Supreme Court recently issued a crucial 5-4 ruling in the Trump v. Cook case, rejecting the appeal to remove Federal Reserve Governor Lisa Cook without a valid conviction and substantial evidence, thus upholding the bottom line of the Federal Reserve's independent operation.

The core significance of this ruling is to eliminate the possibility of the White House controlling monetary policy by arbitrarily appointing or dismissing Federal Reserve governors and installing factional personnel.

Previously, the White House argued that the president could dismiss Federal Reserve officials based on "reasonable grounds" as determined by his own subjective opinion, and that the judicial system would have no right to review such cases. If this demand were to be implemented, the Federal Reserve would be completely reduced to a political tool, and interest rate policy would serve political demands rather than economic fundamentals.

The Supreme Court ruling clarifies that Federal Reserve governors enjoy statutory job protections and that the executive branch has no right to arbitrarily interfere in personnel and policy decisions.

It is worth noting that during the same period, the Supreme Court recognized the president's discretionary power to appoint and dismiss officials in other independent regulatory agencies' personnel appointment and dismissal cases, but uniquely exempted the Federal Reserve, which fully highlights the special institutional position of the central bank independent of political interference.

Lisa Cook herself stated that the essence of this controversy was political pressure on independent monetary policy, and the ruling reinforced the Federal Reserve's principle of "relying solely on data and serving the economic interests of the entire population."

Cook, who joined the Federal Reserve in 2022, has always adhered to objective and professional policy judgments and is a core defender of the Fed's independence.

With this ruling in effect, the market has been completely freed from the disturbances of political games and can focus on core economic data such as inflation and employment to judge the pace of the Federal Reserve's policies. The pricing logic of the macro market has returned to rationality.

Because successive White House administrations have wanted the Federal Reserve to maintain an accommodative stance, if the Fed's independence is affected, the market will directly factor in some inflation expectations. The most significant impact on the market this time is the decline in inflation expectations due to the Fed's independence, which ultimately leads to lower US Treasury yields through a decrease in expectations of interest rate hikes.

Inflation Outlook: Short-term disturbances are gradually clearing up, but the medium- to long-term inflation center remains stubbornly high.

While market opinions on inflation trends vary, there is a high degree of consensus on the core issue: in the absence of new geopolitical shocks and with monetary policy remaining unchanged, a short-term decline in US inflation is highly likely, but a rapid return to the 2% policy target in the medium to long term is unlikely.

Currently, the US PCE inflation rate remains at 4.1% year-on-year. Although it has fallen significantly from the previous high, it is still far above the Fed's long-term inflation target of 2%.

The core driver of this round of inflation cooling comes from the fading of two types of one-off disruptive factors, which can take effect on their own without the need for the Federal Reserve's tightening policies.

Firstly, the easing of geopolitical conflicts in the Middle East and the resumption of smooth shipping in the Strait of Hormuz have led to a downward trend in previously high energy prices, gradually repairing the energy premium that previously drove up inflation.

Secondly, the price increase transmission cycle caused by tariffs has completely peaked, and inflation in core commodities continues to cool down. Once prices fully return to pre-tariff levels, they will further drag down overall inflation by more than 0.5 percentage points. The clearing of energy and tariff factors alone would be enough to push inflation to the 2.5% range.

From a professional statistical perspective, corrective indicators such as median inflation and cut-off mean inflation, which exclude extreme price fluctuations, can better reflect the true inflation trend.

Various detailed calculations consistently indicate that the medium- to long-term inflation rate in the United States is likely to remain in the 2.5%-3% range and is unlikely to fall quickly back to the 2% target level.

This means that the Federal Reserve is currently facing a dilemma: either wait for the endogenous deflationary momentum of the economy to continue to be released, or restart interest rate hikes to suppress stubborn inflation.

The core sticky pressure of inflation is currently concentrated in the core non-housing services sector, which is also the main driver of persistently excessive inflation.

Among them, the price increases in categories such as airfares and asset management service fees are short-term mechanical fluctuations, and will subsequently recover as statistical methods are adjusted and energy prices decline; however, the inflation of labor-intensive services such as medical care, entertainment, hotels, and catering is highly sticky and has been higher than the normal level before the pandemic for a long time, becoming the core obstacle to the decline of inflation and a structural cost that the US economy must bear for a soft landing.

Overall, the short-term inflation trend is clear, but the medium- to long-term high inflation level is difficult to reverse. The uncertainty of the inflation trend directly determines that the Federal Reserve's interest rate policy cannot easily shift to easing.

Macroeconomic Closings and Gold Price Links: Fed Policy Setting Dominates Medium- to Long-Term Gold Pricing

This Supreme Court ruling has upheld the Federal Reserve's policy independence, completely ending market concerns about political interference in monetary policy. The Fed's interest rate decisions will now be fully grounded in inflation and employment data, significantly improving policy predictability. This macroeconomic context directly reshapes the logic behind gold pricing.

From the perspective of the core pricing formula, gold, as a non-interest-bearing asset, has a strong negative correlation with the US real interest rate. Currently, market inflation expectations are rigid in the short term, and fluctuations in nominal interest rates basically dominate the trend of real interest rates, thereby driving the rise and fall of gold prices.

The decline in energy prices cooled inflation expectations, while market expectations for interest rate cuts increased. The decrease in nominal interest rates on US Treasury bonds pushed down real interest rates, effectively reducing the opportunity cost of holding gold and providing strong support for gold prices. Coupled with repeated disturbances from geopolitical risks in the Middle East, gold prices continued to hold key support levels and rebounded after hitting a low.

In the medium to long term, the US inflation rate remains stubbornly high at 2.5%-3%, meaning that the Federal Reserve is unlikely to quickly initiate an easing and rate-cutting cycle, and real interest rates are unlikely to decline significantly in a trend, which will also limit the upside potential of gold.

Overall, gold is currently in a volatile pattern supported by geopolitical safe-haven demand and restrained Federal Reserve policy.

The Federal Reserve's increased independence and return to data-driven policy have allowed gold prices to move away from the disorderly fluctuations caused by political maneuvering and fully enter a structured market dominated by "inflation data + real interest rates".

The strength of subsequent inflation stickiness and the pace of the Federal Reserve's interest rate adjustments will be the core factors determining the direction of gold price breakouts, and also the core anchor for medium- to long-term trading.