This week, the U.S. Federal Reserve flagged fewer rate cuts ahead, citing persistent inflation and uncertainty about Trump’s planned tariffs, tax cuts, and immigration policies.
The Fed’s projections now include higher growth for 2025, but also higher inflation, which led to a stock market slump and a reevaluation of further rate cuts.
In Asia, the Bank of Japan held its ultra-low interest rates, citing uncertainty about Trump’s policies, particularly their potential impact on Japan’s export-driven economy. A survey showed most Japanese businesses expect Trump’s policies to negatively affect their operations.
In Europe, central banks are adjusting their strategies. Norway’s central bank maintained its high interest rate, warning that trade tensions with the U.S. could hurt global growth, while Sweden’s central bank cut its rate but showed more caution for future reductions.
Ahead of the Fed’s decision, both the European Central Bank and the Bank of Canada had already lowered rates. ECB President Christine Lagarde stressed the risks from potential U.S. trade conflicts. Meanwhile, in Canada, Finance Minister Chrystia Freeland resigned after clashing with Prime Minister Trudeau over how to handle U.S. tariffs under Trump.
Trump’s proposal to create a strategic bitcoin reserve also faced resistance when Powell stated the Fed lacked the legal authority to pursue such an idea, causing a drop in crypto assets, including a significant fall in bitcoin’s value.
