(Reuters)
The Federal Reserve will lead a pack of central banks meeting to set interest rates after weak U.S. GDP data and President Donald Trump’s outspoken criticism of Fed leadership rattled markets.
China trade data and Asian inflation numbers are expected to show the first evidence of the impact of Trump-led tariffs, and markets assess the fallout from weekend elections in Australia, Romania and Singapore.
Here’s a look at the week ahead from Lewis Krauskopf in New York, Rae Wee in Singapore, and Naomi Rovnick, Marc Jones and Karin Strohecker in London.
1/ CROSSROADS
The Fed’s policy meeting follows data showing a contraction in first-quarter U.S. GDP and pressure from Trump on the central bank to cut interest rates.
While the world’s foremost central bank is widely expected to hold rates steady on Wednesday, the focus will be on when it might resume its easing cycle, and whether June is a “live” meeting for policy action.
Central bank officials will have to balance concerns about a potential economic downturn with worries about a tariff-induced revival in inflation.
And the political pressure is intense. Trump has repeatedly criticised Fed policy and chief, Jerome Powell, fuelling concerns about the central bank’s independence. Trump said on Sunday he will not remove Powell before his term ends in May 2026 while repeating calls for the Fed to lower rates.
2/ HIGH STAKES
With progress on Sino-U.S. trade talks elusive, investors will monitor trade data from China on May 9.
As the first reading since Trump’s 145% levies on most Chinese goods took effect, it will provide insight on the impact in the world’s second-largest economy.
Inflation figures are due on May 10, as a prolonged battle with deflation is probably the last thing Beijing wants as it braces for a protracted trade war.
Elsewhere in Asia, consumer price and growth data across Indonesia, Thailand and the Philippines are due. Downside risks, given the threat of hefty U.S. tariffs, have dimmed growth prospects in the region and increased the bets on more rate cuts.
3/ WHAT TARIFF ANGST?
Some unusually positive trends in the UK stand out against the tariff terror gripping most of the world, with sterling scaling three-month highs against the dollar, the FTSE All-share index jumping 10% in four weeks and rate cut expectations high.
The global trade war threat to Britain’s small and open economy, alongside cheaper imports and anticipated slower wage growth, has handed the Bank of England deflationary indicators to feed into forecasting models.
Nearly all traders expect the BoE to cut borrowing costs by a quarter-point on Thursday. A similar move by Sweden’s Riksbank on the same day could add to bets for an eighth straight European Central Bank cut in June.
UK bonds are also rallying, with the 10-year gilt yield about 56 basis points below its January high, giving the debt-laden Labour government some headroom to resist further tax hikes and deepen spending cuts.
4/ THE OTHER WAY
It’s a complex picture for emerging market central bankers, navigating the trade war and ensuing inflation effects as well as a weaker dollar.
While most rate setters ponder when they can cut again, Brazil’s central bank is on the way up, at least for now.
Central bank chief Gabriel Galipolo has confirmed a hike is likely at the Tuesday and Wednesday meeting as Latin America’s largest economy faces a still-uncertain economic outlook and above target inflation.
Meanwhile, the mood has become more dovish in Poland, where the central bank meets on the same days.
Poland’s main interest rate has been at 5.75% since October 2023, and a cut was pencilled in for the months to come. But lower-than-expected inflation pressures have led a growing number of policymakers to signal that the cost of credit may fall sooner rather than later.
5/ HEY BIG SPENDERS
Three elections at the weekend hold market-moving potential.
Australia’s Anthony Albanese claimed a historic second term as prime minister on Saturday in a dramatic comeback against once-resurgent conservatives that was powered by voters’ concerns about the influence of Trump.
Singapore’s ruling People’s Action Party won its 14th successive election but PM Lawrence Wong now faces economic turbulence from a global trade war.
And in Romania, hard-right eurosceptic George Simion won the first round of Romania’s presidential election re-run on Sunday, after a ballot seen as a test of the rise of Trump-style nationalism in the European Union.
A Simion victory could isolate Romania, erode private investment and destabilise NATO’s eastern flank, where Ukraine is fighting a three-year-old Russian invasion, political observers say.
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