Shaw and Partners

Wall Street fluctuated between gains and losses over the week in which trading volumes were relatively light, ultimately managing to close in the green. Central banks took centre stage, with the Federal Reserve holding its policy rate steady as widely expected on Wednesday. While the Fed cut its 2025 GDP expectation to 1.7%, amid tariff uncertainty, however investors appeared to welcome the more dovish than expected tone. Following the Fed meeting US Treasury yields declined and the 10-year yield ended the week down at 4.25%.

Trump’s tariffs and the potential impact on growth and inflation continued to weigh on sentiment, although stocks received a boost on Friday as the President noted that there could be flexibility on tariffs. For the week the Dow Jones Industrial Average continued to be the best performer amongst the major US indices, up 1.2%, its biggest weekly rise in two months. Meanwhile the S&P 500 was up 0.5% and the Nasdaq Composite eked out a 0.2% rise.

The pan-European STOXX 600 added 0.6% for the week, logging its first rise after two weeks of declines. Regional performance was mixed as French and UK indices saw slight gains, while the German DAX dropped 0.4%. The latter was down even after the German parliament passed a reform to lift government borrowing and create a €500bn fund. There were also a number of central bank meetings in Europe, with both the Bank of England and Sweden’s Riksbank remaining on hold. Meanwhile the Swiss National Bank cut its interest rate by a quarter percentage point to 0.25%, in what could be its last move of this cutting cycle.

Japanese equity indices were some of the best performers of the week, helped by foreign buying and a weaker yen. The Nikkei 225 advanced 1.7% while the broader Topix added 3.3%. This came as the Bank of Japan left its interest rates on hold, although with core inflation up at 3% year-on-year in February, ahead of the central bank’s target, this boosted expectations of future rate hikes. Most Asia Pacific equity indices were higher on the week, although Chinese markets were an exception. The Shanghai Composite experienced a 1.6% drop, with mixed economic data released over the week as well as investors pulling back from recent gains.

Weekly macro highlights

Fed holds rates in March

The US Federal Reserve (Fed) left the Fed funds target range unchanged at 4.25-4.50% at its Federal Open Market Committee (FOMC) meeting on 19 March. The decision was in line with market expectations and reflected the FOMC’s view that economic activity has continued to expand at a solid pace, labour market conditions remain solid, and inflation remains somewhat elevated. The meeting also saw FOMC members update their economic projections. The median projection for real GDP growth was lowered to 1.7%, 1.8% and 1.8% in 2025, 2026 and 2027 respectively from the 2.1%, 2.0% and 1.9% projected in December. The median projection for the unemployment rate in 2025 was raised from 4.3% to 4.4% while the projections for 2026 and 2027 were unchanged at 4.3%. The median core personal consumption expenditures (PCE) inflation projection was revised upwards from 2.5% to 2.8% while the projections for 2026 and 2027 were unchanged at 2.2% and 2.0% respectively.

BoE and BoJ leave rates unchanged in March

The Bank of England (BoE) Monetary Policy Committee (MPC) voted by a majority of 8-1 to maintain Bank Rate at 4.5% at its meeting on 19 March. The decision reflected the MPC’s view that there has been substantial progress on disinflation over the past two years but that withdrawal of policy restraint will need to remain gradual in order to “squeeze out persistent inflationary pressures”. The Bank of Japan (BoJ) was also on hold on 19 March, with the Policy Board voting unanimously to encourage the uncollateralized overnight call rate to remain at around 0.5%. The BoJ highlighted that underlying inflation continues to rise, as have services prices, reflecting factors such as wage increases and rising inflation expectations. Both the BoJ and BoE separately emphasised a heightened degree of uncertainty surrounding the current policy environment due to the evolving situation regarding global trade policy and the US tariff announcements.

SNB and BCB alter policy in March

The Swiss National Bank (SNB) Governing Board agreed to lower the SNB policy rate by 25 basis points to 0.25% at its meeting on 20 March. The SNB noted that inflation has developed in line with expectations since its last monetary policy assessment in December. However, without the March rate cut, the conditional inflation forecast, which is within the 0-2% price stability range over the entire forecast horizon, would have been lowered in the medium term. The Banco Central do Brasil (BCB) also met last week, with its Monetary Policy Committee (Copom) voting unanimously to raise the Selic rate by 100 basis points to 14.25% at its meeting on 19 March. The BCB noted that the current scenario is marked by additional deanchoring of inflation expectations and resilience on economic activity, which require a more contractionary monetary policy. Copom also noted that it anticipated an adjustment of lower magnitude in the next meeting.