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The Fed’s Rate Cuts Are On Pause. But Are They Also Off the Table?

  • Federal Reserve officials are debating monetary policy amid renewed stagflation risks and persistent inflation not returning to 2%.
  • Fed officials are almost certain to hold benchmark interest rates steady at 3.5% to 3.75% at their meeting.
  • A debate exists among officials about removing language suggesting a rate cut is more likely than a hike.

 
Japan’s Central Bank Makes Hawkish Hold as Board Split Widens

  • The Bank of Japan maintained its policy rate at 0.75% but signaled future hikes with a 6-3 vote split.
  • The central bank upgraded its inflation outlook, expecting consumer prices to reach 2.8% in the year ending March 2027.
  • The BOJ tempered its growth expectations for the current business year to 0.5% amid rising energy costs and a weakening yen.
Eurozone Inflation Expectations Jumped in March, But Pay Growth Outlook Unchanged

  • Eurozone households expect 4% inflation over the next year, up from 2.5% in February, a concern for the European Central Bank.
  • ECB officials are prepared to raise borrowing costs if workers expect lasting inflation and secure higher pay.
  • Households expect 3% inflation in three years and 1.2% income growth over the next 12 months, which is unchanged from February.
U.K. Population to Grow More Slowly on Fewer Migrants

  • The U.K.’s official statistics agency expects slower population growth, projecting 71 million people by 2034 due to fewer migrants.
  • The Office for National Statistics lowered its annual net migration projection to 230,000, excluding recent “unusually high levels.”
  • Slower population growth typically leads to slower economic growth and fewer taxpayers.
Spain’s Unemployment Rate Rebounded Above 10% in First Quarter

  • Spain’s unemployment rate rose to 10.83% in the first quarter, climbing back to a double-digit figure.
  • The country lost 170,300 jobs in the January-March period, the most for a first quarter since 2020.
  • The unemployment rate had fallen below 10% in the fourth quarter of 2025 for the first time since 2008.
Moody’s Upgrades China’s Outlook, Citing Resilience in Face of Challenges

  • Moody’s Ratings upgraded China’s credit outlook to stable from negative, citing economic and fiscal strength.
  • The ratings agency forecasts China’s real GDP growth at 4.5% in 2026 and 4.2% in 2027, despite a property slump.
  • Moody’s expects China’s government debt to rise to 82.4% in 2027 from 68.5% in 2025, with contained downside risks.
 

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