Market Update

Markets End Higher as Central Banks Hold Steady
Markets broadly closed the week on a positive note, with interest rate decisions taking center stage. Investors cheered the Federal Reserve’s decision on Wednesday to keep interest rates steady at 4.25%-4.5%, signaling confidence in short-term economic stability. In response, U.S. stocks rallied, ending the session higher as the Fed’s decision aligned with market expectations.
In his post-meeting statement, Fed Chair Jerome Powell acknowledged slowing consumer spending and warned that tariffs could push prices higher. The central bank revised its growth forecast for the year down to 1.7% from 2.1% while raising its core inflation estimate to 2.8%. Powell reaffirmed the Fed’s data-dependent approach, stating that policymakers are prepared to keep rates elevated if inflation remains persistent but remain flexible should the labor market weaken or inflation cool more quickly than expected.
UK Economic & Monetary Policy Update
In the UK, the unemployment rate held steady at 4.4% in January, while wage growth showed signs of easing but remained relatively strong, continuing to outpace inflation. According to data from the Office for National Statistics (ONS), regular pay (excluding bonuses) rose by 5.9% in the three months to January, while total pay (including bonuses) increased by 5.8%, slightly down from 6.1% in the prior period.
Despite concerns over economic weakness—highlighted by a 0.1% contraction in GDP for January—the Bank of England opted to keep interest rates unchanged at 4.5% during its Thursday policy meeting. The decision was influenced by ongoing global uncertainties, including risks from U.S. trade tariffs and geopolitical tensions. Governor Andrew Bailey reiterated that interest rates remain on a “gradually declining path,” though policymakers cautioned that inflation could temporarily rise to 3.7% this year, driven by higher energy costs and supply chain constraints.
Japanese Yen Weakens as Inflation Shows Mixed Signals
The Japanese yen weakened against major currencies during Friday’s European session after fresh inflation data painted a mixed picture of the country’s economic outlook. Headline inflation in Japan eased to 3.7% in February from 4.0% in the previous month, largely due to government energy subsidies. Similarly, core inflation, which excludes fresh food, declined to 3.0% from 3.2%. However, stripping out both fresh food and energy, inflation edged up to 2.6% from 2.5%, indicating persistent price pressures in wages and the services sector.
Despite signs of cooling inflation, steady wage growth and resilient services inflation continue to pressure the Bank of Japan to consider further rate hikes in the coming months.