Having archived a week of purchases for the world financial markets, which saw the inauguration of Donald Trump, the White House and his first executive orders which suggest a less aggressive approach on duties than expected, the attention of investors is now focusing on central banks.
The Bank of Japan anticipates the moves
In Japan, the Bank of Japan raised interest rates to 0.50%, as widely expected, but predicted higher inflation and slower growth in the years ahead. It also warned that it will raise rates further, to levels not seen in Japan since 1995.
New rate cuts expected from the ECB
There European Central Bankafter the four reductions in interest rates decided in 2024, the easing of monetary policy is set to continue during the new year. At the meeting scheduled for Thursday 30 January, the experts expect a further cut in the cost of moneywhich will most likely be a quarter of a point, and analysts expect a second decline also at the March meeting.
“Inflation, at the moment, is not seen as a problem, but there could be signs of greater optimism about growth after the recent PMI data”, highlight the analysts of the Banca MPS market strategy team.
Even last week’s comments made by President Christine Lagarde they seem to suggest that a 25 basis point rate cut is a given and that the easing cycle will continue.
Fed towards a pause in the cutting cycle
Also at the end of January there will be the meeting of Federal Reserve moving towards the decision to leave interest rates unchanged, after the three consecutive cuts made in the second half of 2024 brought the official rate into the 4.25-4.50% range.
Investors, who have been expecting a pause in the Fed rate cut cycle for some time now, will be watching the governor’s press conference with particular attention. Jerome PowellWednesday at 8.30 pm Italian time, to obtain indications on the possible duration of this break.
The Bank of England comes full circle in February
For the decision of Bank of England we will have to wait until the first week of February. According to analysts, the decline in inflation will push the central institution towards the path of easing, with an expected cut of 25 basis points.
In the UK, he explains Mark Dowding, Fixed Income CIO at RBC BlueBayGilt yields have offered Rachel Reeves some relief over the past week, with an upward curve in line with the move in Treasuries. Weakening labor market demand and deteriorating sentiment suggest that the UK economy is currently stalling, with GDP data likely to show 0% growth in the final quarter of the year. THE’public debt increased due to the increase in financing costs, thus highlighting how fiscal policy is now largely tied to the trend in bond yields.
Looking ahead, the expert underlines, “it seems very likely that the Bank of England will exploit every possible opportunity to lower interest rates and, in this context, it is expected to cut rates to 4.5% in February. However, we continue to believe that inflation will remain stubbornly around 3.5-4.0%, meaning Bailey is unlikely to be able to lower rates much further than that.”