Central banks decide interest rates this week amid market anticipation

Grand Central Banks around the world are expected to announce their decisions on interest rates this week, providing decisive guidelines about the market trends, according to the Euronews Network.

Stay tuned for the federal reserve decision

Investors are especially focused on the US Federal Reserve Policies, as the bank may intervene to support Wall Street after entering the correction area amid sharp fluctuations in financial markets.

Global markets record weekly losses

Global stock indicators incurred remarkable losses during the past week, driven by the escalation of the World Trade War that prompted investors to refrain from risk.
Although the market morale witnessed a slight improvement with the recovery of shares on Friday, investors are awaiting the decisions of the Federal Reserve, the Bank of Japan, the Bank of England and the Chinese People’s Bank, as these decisions will determine the path of the markets during the coming period.

Central banks tend to be towards more facilitated policies

Expectations indicate that major central banks may adopt a more tolerant position to support the global economy, especially after the exacerbation of the risks resulting from the customs duties imposed by US President Donald Trump, which led to increased pressure on global growth.
Testary monetary policies may enhance the opportunities for the recovery of stock markets, as the Federal Reserve used to support Wall Street to get out of the previous correction periods.

The federal may maintain interest rates

The US Federal decision on interest rates is likely to be the most important event for financial markets this week.
The Federal Reserve reduced interest rates by 100 basis points in 2024, ranging between 4.25% and 4.5%. In January, the quantitative facilitation cycle temporarily stopped due to the flexibility of the labor market and the stability of inflation.
According to banknotes data, the Federalism is expected to keep the interest rate unchanged until June 2025, a date closer to the previous expectations that indicated September.

The repercussions of the trade war on the American economy

The strict customs policies imposed by the Trump administration affected the American economy, which led to a decrease in consumer confidence to its lowest level in two years, amid fears of high inflation.
In the same context, the Consumer Prices Index (CPI) in the United States came lower than expected during February, which increases the risk of the federal reduced interest rates sooner than expected.

The effect of federal decisions on market morale

While the federal may express its concerns about economic expectations, it is likely that it is likely to emphasize the need for additional evidence for the continued decline in inflation before making any interest decisions.
The Federal’s future directions are a key factor in determining the trends of financial markets during the coming period.

A possible effect on the US dollar and stocks

If the federal adopts a pessimistic position, or what is known as the “federal reserve option”, this may lead to a strong recovery in the American stock markets, as happened during the first term of Trump.
This is also expected to weaken the US dollar, which may push the euro and other major currencies to rise.

China may keep interest rates as well

The Chinese People’s Bank is also likely to keep the major interest rates on lending at 3.1% for loans for a year, and 3.6% for loans for a period of five years,
However, Beijing may resort to more monetary motivation policies to meet the escalation of trade tensions with Washington.
In its last annual meeting, the Chinese government set the goal of economic growth at 5%, with the level of financial deficit to 4%, which is its highest level in three decades.

Bank of Japan may postpone interest rates

Bank of Japan is expected to keep the main interest rate at 0.5% this week, which means suspending the lifting cycle it started in March 2024.
The bank raised the interest rate on deposits three times in March and June 2024, then in January 2025. However, the Governor of the Bank of Japan, Kazu Oida, may express his concerns about the economic impact to raise interest rates amid the case of commercial uncertainty.
Despite these trends, the Japanese yen rose this year, supported by its position as a safe haven, in addition to the Central Bank of Japan’s increases in interest rates.

England Bank may prove the benefit in preparation for lowering it later

The Bank of England is expected to keep interest rates at 4.5% this week, especially as inflation continues to rise in January.
But there are increasing possibilities that the bank will reduce interest rates in May and August 2025, other than the previous expectations that were indicating a single reduction this year.
The need to increase defense spending in Europe, as well as financial reforms in Germany, may push the European Central Bank to continue the policies of monetary facilitation, which may stimulate the Bank of England to follow a similar approach.

The impact of the decisions of the Bank of England on the pound sterling

The pound rose against the US dollar, supported by expectations about increasing government spending in Europe.
However, technical analyzes indicate that sterling has reached the peak of purchase, which makes it vulnerable to a potential price correction in the short term.