Let’s hold on! It has been a busy week for central bank meetings, with many convening to discuss monetary policy. In the UK we saw the Bank of England take the decision to pause, with no change being made to the base rate, held at 4.5%. This was in line with market expectations. There was very little dissent amongst the voting members, with 8 voting in favour of no change, and only 1 voting for a rate cut. As they have for some time now, they remain very much data dependent and opted to take a ‘wait and see’ approach given inflation remains above the 2% target. They also noted heightened geopolitical risks, including the impact on global trade which current and future tariffs, if implemented, could bring.

Data relating to the jobs market continued to show that it remains relatively tight, with unemployment holding at 4.4% and the number of people employed jumping by 144,000. Wage inflation meanwhile remains elevated, with average earnings excluding bonuses running at a rate of 5.9%.

Also on hold this week was the Bank of Japan, with their key interest rate remaining at 0.5%. This was in line with market expectations and was delivered with a unanimous vote. As with the Bank of England, they preferred to take a more cautionary stance, allowing for a period of assessment as to how rising global economic risks play out. The decision was perhaps justified following the later release of inflation data to February, which came out at 3.7% year on year, a fall from the January reading of 4%.

In the US the Federal Reserve took the same action and kept rates unchanged at 4.25%-4.50%. There was again no surprise here. At this meeting each voting member was invited to submit their projection for the future path of interest rates which is then used to compile the dot plot. The median expectation is that we will see a further two interest rate cuts, totally 0.5%, in 2025. For what is now just a little over a 9 month period, there still remains an array of responses, with 4 members believing that rates will be unchanged from here, whilst 2 believe that it will have fallen to 3.50%-3.75% by the end of the year, which would represent a fall of 1.25% from the current level.

The median expectation is also that the US economy will grow by 1.7% in 2025. This is lower than the projection made in December 2024, which was that the economy would grow by 2.1% in 2025. This recent forecast is below the expectations of the OECD, who believe that a growth rate of 2.2% is still achievable, although this is down from their previous projection of 2.4%. The US wasn’t the only country to receive a downgrade, with the UK now forecast to grow 1.4% compared to the previous estimate of 1.7%. As we know, however, forecasts can quickly change.

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