Fed Hold Rates ECB Cuts Rates Bank of England Next

Yesterday, the Federal Reserve in the US agreed to hold interest rates within a range of 4.25% to 4.5% pa after last month’s cut.

This ends 3 consecutive months of cuts in the US.  The Fed cited that unemployment had stabilised, but underlying inflation remains high.  This was forecast and markets remained stable although the S&P 500 did ‘wobble’ a little as the S&P does have a considerable share of ‘domestic’ trade within its core companies.  This has post put the Fed at ‘loggerheads’ with President Trump who has suggested he will demand interest rate cuts to boost US business despite inflation and keep US as the No1 economic powerhouse.  Inflation also devalues the USA’s massive government debt pile.

Today, the European Central Bank (ECB) cut interest rates by 0.25% to 2.75% pa.  This is lowest rate in the last 2 years and designed to boost the EU ailing economies as EU inflation is forecast to fall again to target 2% pa this year.  More rate cuts are expected later this year.  Stagnation of the German and French economies, the engine house of Europe, needs a boost and rate cuts should help this.

Comment

Nex week, 6^th February it is the turn of the Bank of England. UK rates are currently at 4.75%, some 0.5% above the US and now 2% above the EU.  It is widely anticipated that the Bank of England will cut rates to tray and boost the economy and avoid recession, but inflation remains stubborn, so we only are forecasting just two rates in the UK in 2025, one next week and another perhaps in Summer or Autumn.  Let’s hope they are sooner rather than later.