ECB Cuts Rates for the Seventh Consecutive Time Amid Trade Pressures and Falling Inflation
In a move reflecting the continuation of its monetary easing policy,
the European Central Bank has cut interest rates for the seventh time amid trade pressures and a decline in inflation rates.
The European Central Bank (ECB) announced on Thursday, following a meeting of its monetary policy committee,
a 25 basis point cut in interest rates—an action in line with market expectations—marking the seventh consecutive easing move.
With this decision, the main refinancing operations rate now stands at 2.40%, down from 2.65%,
while the deposit facility rate was reduced to 2.25%.
In the monetary policy statement released after the decision,
the ECB indicated that the process of reducing inflation is moving in the right direction,
noting that both headline and core inflation declined in March, including a notable drop in services sector inflation.
The statement also pointed out that most indicators support the return of inflation to the bank’s medium-term target of 2%,
with wage growth remaining moderate and corporate profits helping to absorb the impact of rising wages on inflation.
The ECB affirmed that the eurozone economy continues to show a degree of resilience in the face of global shocks.
However, it warned that escalating trade tensions are starting to negatively affect growth prospects
and confidence among households and businesses,
adding that a negative market reaction could tighten financial conditions.
The ECB’s Governing Council emphasized its commitment to a data-dependent approach,
stating that it will assess inflation expectations based on evolving economic and financial conditions,
core inflation dynamics, and the effectiveness of monetary policy transmission.
The bank also reiterated that it is not pre-committed to a specific interest rate path,
stressing its readiness to use all available tools to ensure inflation stabilizes at the 2% medium-term target
and to safeguard smooth policy transmission amid rising global uncertainty.
ECB Cuts Rates for the Seventh Consecutive Time Amid Trade Pressures and Falling Inflation
UK Inflation Slows, China Sees Strong Growth: While the United Kingdom experienced a decline in inflation during March,
Strengthening expectations of a possible interest rate cut,
The Chinese economy surprised markets by posting strong retail sales and industrial production growth,
marking the highest levels over the past year. In this report, we review key UK inflation indicators and the impact of monetary policy.
We also analyze Chinese economic data and what it signals about the shifting growth momentum in Q1 of 2025.
UK Inflation Slows in March… and Rate Cut Expectations Rise Amid Trump’s Trade Pressure
The inflation rate in the United Kingdom decelerated in March,
Driven by falling fuel prices and stable food costs.
This was despite a notable rise in clothing prices following an unexpected drop in February.
According to data released Wednesday by the Office for National Statistics,
the Consumer Price Index (CPI) rose by 2.6% year-on-year,
lower than expectations of a 2.7% increase and below February’s reading of 2.8%.
Core inflation, which excludes volatile items such as energy and food, rose by 3.4% in March,
slightly down from 3.5% in February.
This reflects a modest decrease in underlying price pressures.
Inflation in the UK likely hasn’t peaked yet.
The Bank of England estimates it could reach 3.7% in the third quarter of 2025—
nearly double the official 2% inflation target.
“Given these developments, expectations are rising that
The Bank of England could cut interest rates at its next meeting on May 8,
Following a decision to keep them steady at 4.5% in March.
“Ongoing concerns about inflation and growing uncertainty over U.S. President Donald Trump’s
Protectionist trade policies push the Bank of England toward a potential rate cut.”
China Outperforms Expectations in March: Retail and Industrial Growth at Highest Level in Over a Year
Official data released Wednesday morning revealed robust economic performance in China during March.
Retail sales grew by 5.9% year-on-year — the fastest pace in 15 months,
beating analyst forecasts of a 4.2% rise and surpassing February’s 4% increase.
In another sign of improving economic activity, industrial production surged by 7.7% in March,
the highest rate since June 2021, and well above market expectations
that had projected growth to remain at February’s 5.9% pace.
On the labor front, the National Bureau of Statistics reported that the unemployment rate fell to 5.2% in March,
below forecasts of 5.3% and improving over February’s 5.4%.
This indicates a slight recovery in job market conditions despite ongoing challenges.
These indicators point to accelerating economic momentum in China during Q1 2025,
supported by strong domestic demand and an upturn in industrial activity,
even as some pressure remains in the labor market.
Inflation Anxiety Rattles Wall Street: U.S. markets experienced a sharp stock selloff,
a rise in bond prices, and goldhitting a new record high amid signs
of weakness in the core of the U.S. economy
and growing fears of worsening inflation driven by the ongoing trade war.
The S&P 500 index fell by 2%, with just one session remaining
before the end of a quarter, which is expected to be the worst since 2022.
Data showed a decline in U.S. consumer confidence and a rise in long-term inflation expectations.
This coincided with another report indicating weak spending and rising prices,
just ahead of an anticipated announcement of new tariffs next week. Large technology stocks dropped by 3.5%,
Meanwhile, the 10-year U.S. Treasury yield fell by 10 basis points to 4.26%.
Concerns Over a U.S. Economic Slowdown
Brett Kenwell from eToro said the biggest concern is that inflation
remains high while the economy is clearly slowing down.
He added, “While this scenario may not be the base case right now,
any increase in its probability could significantly affect investor sentiment.” He continued, “Unless there is greater economic deterioration,
it’s too early to conclude we’re entering a period of stagflation.”
According to Bespoke Investment Group, the Nasdaq Composite Index fell by 2.7%,
marking its fifth drop of more than 2% in March,
the highest number in a single month since the bear market in June 2022.
The Dow Jones Industrial Average fell by 1.7%.
Major companies saw broad declines, with Amazonand Alphabetfalling
more than 4% and Lululemon Athletica dropping by 14% after issuing a bleak outlook.
At the same time, the U.S. dollar fell by 0.1%, and Bitcoindropped by 4%.
Trump’s Tariffs Deepen Inflation Fears
As President Donald Trump’s administration escalates tariffs,
Consumers are increasingly concerned that these new duties will increase prices.
A sustained rise in costs may push households to reduce non-essential spending,
negatively impacting the broader U.S. economy and corporate earnings.
David Alkaly from Lazard Asset Management said,
“Today’s data reflect the pattern many analysts expect to see in the coming months:
weaker-than-expected spending and stronger-than-expected inflation due to the new tariffs and policy changes.” He added that if this pattern continues to appear in official statistics,
it could fuel further concerns as the upcoming tariff announcements approach.
Jim Baird from Plante Moran Financial Advisors stated, “In times of uncertainty,
financial planning becomes more complex, and consumers face difficult decisions.
Inflation has returned as a major and growing concern.”
Downgraded Growth Forecasts and Fund Outflows
According to a Bloomberg survey, economists have lowered their forecasts for U.S. economic growth this year.
They expect a decline in consumer spending and slower capital investment
due to uncertainty caused by ongoing changes in trade policy.
At the same time, U.S. equity funds recorded their largest weekly outflows since the start of the year.
In contrast, inflows into European equities continued,
according to Bank of America, citing data from EPFR Global.
Advice for Investors: Be Patient
Mark Hackett from Nationwide said the recovery rally could face disruptions,
Although April has historically been a positive month.
He added that investor sentiment has reached extreme levels,
which can sometimes serve as a contrarian indicator. He continued, “Historically, when market sentiment becomes this strained,
the S&P 500 tends to deliver strong returns over the next 6 to 12 months.
Overall, investors should remain patient for now.”
Meanwhile, David Lefkowitz from UBS Global Wealth Management
lowered his year-end target for the S&P 500 from 6600 to 6400 points due to recent economic turbulence.
Still, he believes stocks will recover and resume rising through the end of 2025. In a note to clients on Friday, he wrote:
“We still believe U.S. equities can recover and post gains this year.”
ECB Vice President: Inflation Is on the Right Track Despite Challenges
Amid global economic fluctuations and challenges facing financial markets,
inflation in the Eurozone remains under control, according to European Central Bank (ECB) Vice President Luis de Guindos.
He emphasizes that fundamental factors have begun to stabilize despite ongoing challenges.
Luis de Guindos, Vice President of the European Central Bank,
affirmed that inflation remains under control despite a slight increase in recent months.
He pointed out that key factors, such as employee compensation and inflation in the services sector,
have started to stabilize.
This supports the ECB’s forecast that inflation will reach 2% by the end of 2025 or early 2026.
In an interview published by the ECB, de Guindos stated that the European economy continues to face uncertainty due to tariffs,
global financial policies, and the impact of adjustments in interest rate expectations and German bond yields,
which are being closely monitored.
Growth Challenges
De Guindos highlighted that U.S. trade and regulatory measures are a major source of instability,
noting their potential impact on economic growth forecasts in the Eurozone.
As a result, the ECB has lowered its growth projections for 2025 and 2026 by 0.2 percentage points,
citing declining investor confidence and fears of a potential trade war.
Nevertheless, he suggested that European consumption could recover if consumer confidence improves,
supported by factors such as rising real wages and better financing conditions.
In conclusion, the ECB Vice President stressed the importance of European market reforms,
including the integration of the internal market, completion of the banking union,
and the Capital Markets Union, to enhance productivity and European competitiveness.
ECB Vice President: Inflation Is on the Right Track Despite Challenges
Global Economic Challenges: Declining Inflation in France and Weak Growth and Oil Price Forecasts
Amid global economic fluctuations, France has experienced a sharp decline in inflation,
while major financial institutions have lowered their forecasts for U.S. economic growth and oil prices in 2025,
reflecting economic uncertainty and increasing challenges for markets.
France’s Inflation Drops to a Four-Year Low Amid Falling Energy Prices
The annual inflation rate in France dropped to 0.9% in February, marking its lowest level in four years,
according to data from the National Institute of Statistics and Economic Studies.
This decline was driven by a sharp drop in energy prices, along with a slowdown in the prices of services,
manufactured goods, and tobacco, despite a slight increase in food prices.
Inflation stood at 1.8% in January, indicating a significant improvement in price levels.
On a monthly basis, the harmonized consumer price index for the European Union rose by 0.1%,
exceeding expectations, which had suggested price stability or a 0.2% decline.
In a related development, the French central bank revised its economic growth forecasts for 2025,
citing global trade tensions affecting demand for French exports.
The bank projected that growth would slow from 1.1% last year to 0.7% this year,
but anticipated that improved business investments would boost growth to 1.2% in 2026 and 1.3% in 2027.
J.P. Morgan
J.P. Morgan Cuts U.S. Economic Growth Forecast for 2025 Amid Rising Economic Challenges
J.P. Morgan has lowered its forecast for U.S. economic growth in 2025,
expecting a slowdown from 2.6% to 1.9% due to mounting economic pressures and uncertainty over fiscal and trade policies.
According to the bank’s report, new tariffs imposed by the U.S. will lead to higher prices and increased living costs,
which could weaken consumers’ purchasing power.
Additionally, affected countries are expected to respond with retaliatory measures that
may impact U.S. exports and the performance of major companies.
Furthermore, the bank warned of slowing consumer and investment spending as consumers
and businesses become more cautious due to inflationary pressures and
the unclear monetary policy direction of the Federal Reserve.
This revision comes amid concerns that these challenges could result in a deeper economic slowdown than previously anticipated.
Barclays
It Lowers 2025 Oil Price Forecast Amid Economic Uncertainty
Barclays has cut its 2025 average Brent crude price forecast by $9 to $74 per barrel,
citing weaker demand expectations amid increasing economic uncertainty.
Barclays analysts noted in a research memo that they had reduced their 2025 demand forecast
by 510,000 barrels per day due to weak economic indicators.
In the same context, the International Energy Agency (IEA) warned that global oil supply could exceed demand
by 600,000 barrels per day this year,
as U.S.-led production increases while global demand remains weaker than previously expected.
Barclays also lowered its oil demand growth forecast,
now expecting an increase of 900,000 barrels per day in 2025.
Meanwhile, U.S. crude oil production is expected to rise by 200,000 barrels per day
by the fourth quarter of the year compared to the same period last year.
Global Economic Challenges: Declining Inflation in France
Impact of Inflation Data on Stock Markets: Inflation data shapes financial market movements,
directly influencing central bank decisions, investor sentiment, and asset prices.
Following the latest U.S. inflation data release,
stock markets experienced significant volatility,
with better-than-expected figures helping markets recover after heavy losses.
In this article, we analyze the impact of recent inflation data on global markets,
focusing on Asian and U.S. stock movements, bond and currency performance,
and expectations regarding the Federal Reserve’s upcoming decisions.
Will the upward trend continue, or does uncertainty still dominate the markets? Keep reading for the full analysis.
Asian stocks climbed on Thursday after better-than-expected
U.S. inflation data helped Wall Street recover after two days of significant losses.
Japan and South Korea indices posted gains, while Hong Kong
and China markets showed mixed results.
U.S. stock futures also rose in early Asian trading, reinforcing gains from the previous session.
Despite Wednesday’s rally in the S&P 500 and Nasdaq 100 Both indices remain down more than 3% this week, marking their first gains since Friday.
Meanwhile, U.S. government bonds showed slight stability on Thursday,
with minimal movement following the inflation report.
The 10-year Treasury yield increased by three basis points to 4.3%,
while the 2-year yield rose by four basis points.
Major currencies fluctuated within narrow ranges,
and the U.S. dollar index mainly remained stable.
Ongoing Market Uncertainty
The lack of a strong market reaction to the inflation data highlights
the persistent uncertainty driven by economic policies.
Christina Woon, a portfolio manager at Eastspring Investments, told Bloomberg TV: “There is a constant flow of economic news from the U.S. and China,
creating significant volatility. While the U.S. economy was
a strong bet earlier this year, recent trends suggest a shift in favor of Asian markets, particularly China.”
U.S. Inflation Data and Its Impact
The U.S. Consumer Price Index (CPI), including a core measure
that excludes food and energy prices, rose 0.2% in February, below the expected 0.3% increase.
According to analysts at TD Securities, while the data presents positive signals,
it does not fully eliminate uncertainty, as inflation expectations remain
unclear due to ongoing political and economic developments. They added: “It is unlikely that the Federal Reserve will adjust its monetary policy based on this data alone.”
Focus on Producer Price Index Report
Markets are now looking forward to the U.S. Producer Price Index (PPI) report,
set to be released later on Thursday.
This report will provide further insights into inflationary pressures
influencing the Federal Reserve’s decision-making.
Concerns Over Tariffs
On Wednesday, President Donald Trump reaffirmed that the U.S.
would respond to European countermeasures against newly imposed 25% tariffs on steel and aluminum,
increasing fears of further trade tensions.
Additionally, in response to the U.S. trade measures,
Canada announced 25% tariffs on approximately $20.8 billion
of U.S. goods, including steel and aluminum.
Global Market Outlook
Investors are closely watching upcoming economic data,
including consumer confidence in Thailand, industrial output in Hong Kong,
and India’s trade figures, which could be released anytime before March 17.
Additionally, China’s money supply data is expected by March 15.
In the technology sector, strong gains in U.S. equities supported significant tech stocks,
with the “Magnificent Seven“ (Apple, Nvidia, Amazon, Alphabet, Meta, Microsoft, Tesla)
climbing 2.3%, marking their best day since January.
Meanwhile, Intel announced a new CEO,
while Adobe issued weaker-than-expected business forecasts, impacting its stock performance.
Federal Reserve Watch
Despite lower-than-expected inflation data,
markets remain cautious regarding the Federal Reserve’s next move.
Analysts believe the central bank is unlikely to cut interest rates soon.
Jeff Schulze, an investment strategist at ClearBridge Investments, stated: “While this data gives the Fed more breathing room,
future decisions will primarily depend on labor market conditions and inflation control.”
Some analysts still anticipate an interest rate cut in June,
with traders pricing an estimated 70 basis points of rate reductions throughout 2025.
Future Market Projections
According to BlackRock analysts, the Federal Reserve will likely
maintain a cautious monetary policy approach over the coming months,
closely monitoring developments in the U.S. economy and ongoing trade tensions.
Ultimately, investors remain cautious amid market fluctuations,
awaiting key economic data that could soon shape central bank policies and market directions.
Slowing US Annual Inflation Boosts Rate Cut Prospects
The annual inflation rate in the United States slowed more than expected in February,
a sign that could prompt the Federal Reserve to accelerate interest rate cuts to support economic growth.
According to official data released on Wednesday, the annual consumer price inflation rate slowed to 2.8% in February,
exceeding expectations of 2.9%, down from 3% in January.
Meanwhile, core inflation, which excludes volatile food and energy prices,
eased to 3.1% during the same month, compared to forecasts of 3.2%, after recording 3.3% in January.
Monthly Inflation
Notable Slowdown in Monthly Inflation
On a monthly basis, inflation fell by 0.2% in February, following increases of 0.5% in January and 0.4% in December.
Similarly, core inflation slowed to 0.2% in February, down from 0.4% in the previous month.
Key Influencing Factors
Main Factors Driving Inflation Trends
The slowdown was primarily driven by a decline in new car prices and transportation services,
while rents, healthcare, and used vehicle prices saw increases.
Food prices rose 0.2% month-over-month, compared to 0.4% in January,
while energy prices slowed to 0.2% after rising 1.1% in the previous month.
These figures could strengthen expectations that the Federal Reserve may accelerate the pace of interest rate cuts this year,
particularly as inflation continues its gradual decline.
Slowing US Annual Inflation Boosts Rate Cut Prospects
Eurozone Inflation Continues to Rise for the Fourth Month: The annual inflation rate in the Eurozone increased for the fourth consecutive month in January, posing a challenge
for the European Central Bank (ECB) in implementing its plans to cut interest rates in the coming period.
Eurozone Inflation Continues to Rise for the Fourth Month, Hindering Rate Cut Plans
The annual inflation rate in the Eurozone continued its upward trend for the fourth consecutive month in January,
which could complicate the ECB’s plans to lower interest rates.
According to data released by Eurostat on Monday,
the annual consumer price inflation rose to 2.5% in January, up from 2.4% in December.
Meanwhile, core inflation, which excludes volatile food and energy prices, remained stable at 2.7%, aligning with initial estimates.
The services sector, the largest contributor to overall inflation, saw a slight slowdown,
recording 3.9% year-over-year, compared to 4% in December.
By country, Hungary recorded the highest inflation rate in the Eurozone in January at 5.7%, followed by Romania at 5.3%. In Germany, Europe’s largest economy, inflation rose to 2.8%, reflecting ongoing inflationary pressures in the region.
USAID Lays Off 2,000 Employees and Places Others on Administrative Leave
The United States Agency for International Development (USAID) has laid off 2,000 employees across
the U.S.. At the same time, most of the remaining staff will be placed on administrative leave,
according to an email sent to employees on Sunday.
The message stated that all directly hired employees,
except for key leadership and those handling essential tasks or specific programs,
will be globally exempt from duty starting at 11:59 PM ET.
It also confirmed that official layoff notices will be issued soon.
The move has sparked strong criticism, with the American Foreign Service Association (AFSA) expressing discontent.
AFSA President Tom Yazdgerdi called the decision “rushed and harsh,”
citing the significant impact on employees’ personal and professional lives.
These layoffs follow a federal judge’s ruling on Friday.
The ruling lifted a temporary restraining order that had prevented the government
from placing thousands of employees on forced leave and allowed the administration to proceed with its planned workforce reductions.
The layoffs have affected employees in USAID’s Office of Humanitarian Assistance,
which is responsible for rapid disaster response worldwide.
These changes are part of broader structural reforms within USAID,
one of the largest federal agencies providing humanitarian aid globally.
Improved German Business Sentiment in February Raises Hopes for Economic Recovery
According to IFO Institute data released on Monday,
business sentiment in Germany improved in February,
boosting optimism for a recovery in Europe’s largest economy
especially following the conclusion of parliamentary elections,
which could contribute to greater government stability.
The Business Climate Index rose to 85.4 points in February,
up from 84.3 points in January, exceeding Bloomberg analysts’ expectations of 85 points. The industrial sector remains negative, but the index improved to -22.1 points in February,
up from -24.8 points in the previous month. The services sector saw a decline, with its index falling to -4.3 points in February,
compared to -2.2 points in January, particularly in transportation and logistics. The trade sector index also remained negative at -26.2 points,
but wholesale and retail businesses expressed a more optimistic outlook than in previous periods.
Eurozone Inflation Continues to Rise for the Fourth Month
Fed Minutes Signal Tight Policy Amid Inflation Watch: The Federal Reserve’s January meeting minutes revealed ongoing concerns about elevated inflation
despite indicators reflecting strong economic growth and a stable low unemployment rate,
which confirmed the labor market’s strength in recent months.
Federal Reserve members agreed that monetary policy has become less restrictive than in previous periods.
Still, they deemed it appropriate to keep the interest rate at 4.5%
while monitoring its impact on inflation and economic activity.
They also emphasized the importance of reducing the Fed’s securities holdings as part of a gradual monetary tightening strategy,
considering its effects on financial markets.
Most members pointed out that monetary policy remains restrictive,
requiring close monitoring of economic developments.
They stressed the need to achieve significant progress in reducing inflation before considering any adjustments to interest rates.
Participants underscored that the monetary policy path
is not predetermined but subject to continuous assessment based on economic data,
including labor market performance, inflation levels, and sustainable economic growth.
Many members highlighted that economic uncertainty necessitates a cautious approach when making new policy decisions,
considering various factors that could influence growth and inflation trends in the coming period.
Risks to Monetary Policy
Members discussed monetary policy risks, noting a decline in downside risks
to labor markets and economic activity versus increasing inflationary risks
that could hinder the effectiveness of monetary tightening.
They agreed that keeping interest rates at current levels might
be necessary if strong economic growth persists alongside high inflation.
However, a potential shift toward easing monetary policy could be considered if the labor market slows or inflation declines faster than expected toward the 2% target.
The discussions also covered balance sheet management,
including adjusting bond purchase operations to align SOMA portfolio maturities with Treasury debt composition to avoid market disruptions.
Given expectations of significant fluctuations in reserve levels in the coming months
due to debt ceiling challenges, some members explored the
possibility of slowing or temporarily halting balance sheet reduction until the issue is resolved.
In conclusion, many members emphasized the need to enhance
the Fed’s efficiency and effectiveness to ensure greater flexibility in responding to economic changes and supporting future monetary stability.
Fed Minutes Signal Tight Policy Amid Inflation Watch
U.S. Inflation Beats Forecasts as Powell Stresses Tight Policy: The annual inflation rate in
the United States accelerated beyond expectations in January,
reinforcing the likelihood that the Federal Reserve will maintain high interest rates for longer.
According to data released on Wednesday, the annual Consumer Price Index (CPI) inflation rose to 3%,
surpassing forecasts of 2.9%.
Meanwhile, core inflation, which excludes food and energy prices,
remained steady at 3.3%, while expectations pointed to a slowdown to 3.2%.
On a monthly basis, the CPI increased by 0.5% in January,
compared to gains of 0.4% and 0.3% in the previous two months.
The core index also rose by 0.4%, following a slowdown to 0.2% in December.
Higher housing costs, transportation services, and new and used vehicle prices primarily drove these increases.
In contrast, clothing prices declined, and healthcare costs remained stable.
Meanwhile, food prices increased by 0.4% monthly, compared to 0.3% in December,
while energy prices dropped by 1.1% after rising 2.4% in the previous month.
Inflation Data Impact on Interest Rate Expectations
The inflation data affected investor expectations regarding interest rate cuts,
with projections for two rate cuts this year shrinking to just one amid uncertainty over the impact
of President Donald Trump’s trade and immigration policies on the economy.
Futures markets now price in a 40.1% probability of a 0.25% rate cut at the Fed’s December 2025 meeting,
up from 37% the previous day and 28.5% a week earlier.
Meanwhile, expectations for holding rates steady at the September 2025 meeting rose to 41.9%, compared to 29.9% the previous day.
Powell: Fed Decisions Will Not Be Influenced by Trump’s Calls for Rate Cuts
Federal Reserve Chair Jerome Powell, speaking before the U.S. Congress on Wednesday,
reaffirmed that Trump’s calls for interest rate cuts will not influence the central bank’s decisions.
“You can trust that we will continue to make decisions based on economic data, not political pressure,
” Powell stated. He emphasized that the Fed’s monetary policy will remain restrictive to curb demand and control inflation,
noting that recent inflation data aligns with progress toward the target but still falls short of the desired level.
Responding to a question from Democratic Representative Maxine Waters,
Powell denied any communication with Elon Musk,
who is leading efforts to cut federal spending as part of the so-called “Department of Government Efficiency.”
Trump had called for interest rate cuts while imposing new tariffs
before the January inflation report confirmed persistent price pressures.
U.S. Inflation Beats Forecasts as Powell Stresses Tight Policy
