Central Banks take the stage
It’s a crucial week for monetary policies, as the Fed leads off tonight, with key decisions from the BoE and SNB also coming in
- Fed officials are signaling an extended hold on interest rates – before a move more clarity on tariffs, immigration and taxes is needed with the situation in the Middle East introducing further uncertainty
- The SNB is likely to lower its interest rate to 0% (from 0.25%) – a cut would be motivated by very weak inflation with new forecasts showing it at 0.1% this year
- BoE expected to hold rates after the May cut with inflation remaining at high levels and labor market seen weakening
- The BoJ kept rates unchanged at 0.50% whilst announcing plan to slow the pace of its bond market withdrawal from next year
US/UK - First trade deal reached
UK Prime Minister Starmer and US President Trump reached an agreement to implement some elements of the trade deal announced last month
- Objective was to lower US tariffs on key British exports and raise UK quotas on certain American agricultural products
- The agreement exempts the UK’s civil aerospace sector from Trump’s 10% tariffs and cuts tariffs on UK auto exports from 27.5% to 10%
- 25% tariff on the UK’s steel sector remains in place for now with technical details holding up negotiations – the country remains the only one to avoid the 50% global tariff on steel imposed by Trump last month
China Retail Sales Jump Most Since 2023
China’s retail sales growth accelerated to 6.4% in May, the fastest pace since December 2023, exceeding estimates and offering a confidence boost to Beijing amid the trade war with the US
- The strong number may have been boosted by an annual shopping festival and government subsidies
- The government’s efforts to stabilize the economy and promote development have paid off, but additional support is needed to prop up growth
US Retail Sales Drop for a Second Month
US retail sales fell 0.9% in May, the largest decline since the start of the year, with seven of 13 categories posting declines
- Consumers are pulling back on spending after a buying spree in anticipation of tariffs, with anxiety over tariffs and finances contributing to the decline
- Despite a trade deal with China, Trump’s potential future tariffs and high interest rates continue to impact sentiment, with three in five respondents reporting cutbacks due to recession concerns
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