Global Economy & Markets, Weekly Roundup 04/11/25
US monetary policy easing continued, albeit the economic data inflow remains limited due to the partial federal government shutdown
Global equity markets were mixed in the past week (MSCI ACWI: +0.5% wow). The S&P500 rose by +0.7% wow, at fresh record highs intra-week (6891), with the partial easing of US-China trade tensions providing some support, alongside strong corporate earnings and enhanced dealmaking in the Artificial Intelligence field, as well as a further loosening of US monetary policy.
In the event, the US and China reached an agreement, many parts of which have a c. 1-year horizon, assimilating to a “trade truce” of respective duration. The US agreed, inter alia, to reduce by 10% the current levies imposed on imports of goods from China, up until November 10th 2026. At the same time, China will ease its controls on exports of rare earths, including via deferring recent more stringent (and in a large part targeting US-based entities) controls.
On monetary policy, the Federal Reserve (“Fed”) lowered its policy rate by -25 bps for a 2nd consecutive meeting, to a target range of 3.75% - 4.00%, as expected. Such an action was deemed as better balancing the risks to inflation and the labor market.
At the same time, Mr Powell also noted that if the limited inflow of official economic data due to the partial federal government shutdown continues, the Fed will soon be navigating towards its next steps as if “driving in the fog”, which would require a “slowdown”. In that context, Mr Powell noted that another rate cut in the meeting on December 10th is far from certain.
Meanwhile, the Fed decided to terminate the Quantitative Tightening (QT) process as of December 1st, also as expected, judging that reserves have reached the desired levels (“somewhat above” the ones deemed as consistent with “ample reserve conditions”).
Recall that the balance sheet reduction commenced in June 2022 (-$2.3 trillion since then) and has run recently mainly via a reduction of the holdings of Mortgage-Backed Securities (MBS). Compared with 2019 (pre-Covid), the Fed’s balance sheet has declined by $2.4 trillion to $6.6 tn, c. 21% of US GDP versus 19%. Composition-wise, as of December the proceeds from maturing MBS will be reinvested into Treasury Bills.
The ECB stood pat on October 30th (Deposit Facility Rate: 2.00%), as CPI inflation remains roughly in line with the official target (2.1% in October). President Lagarde noted that the EU-US trade deal, the ceasefire in the Middle-East and the recent US-China trade agreement, have mitigated the downside risks to economic growth.
Note that according to the first preliminary estimate for Q3:2025, real GDP rose by +0.2% qoq (+1.3% yoy) from +0.1% qoq (+1.5% yoy) in Q2:2025, somewhat above consensus estimates for +0.1% qoq and the respective most recent (September 11th) ones from the ECB for 0.0% qoq.
The Bank of Japan (BoJ) also stood pat, with the reference interest rate at +0.50%. The guidance for rate increases remained in place, in view of inflation continuing to run above target. In the event, BoJ Governor Ueda implied that a hike may come as soon as at the next meeting on December 19th, as the BoJ will need “a bit more data” on the ongoing wage negotiations in the private sector and will not necessarily await for their final outcome.
Global equity markets were mixed in the past week (MSCI ACWI: +0.5% wow). The S&P500 rose by +0.7% wow, at fresh record highs intra-week (6891), with the partial easing of US-China trade tensions providing some support, alongside strong corporate earnings and enhanced dealmaking in the Artificial Intelligence field, as well as a further loosening of US monetary policy.
In the event, the US and China reached an agreement, many parts of which have a c. 1-year horizon, assimilating to a “trade truce” of respective duration. The US agreed, inter alia, to reduce by 10% the current levies imposed on imports of goods from China, up until November 10th 2026. At the same time, China will ease its controls on exports of rare earths, including via deferring recent more stringent (and in a large part targeting US-based entities) controls.
On monetary policy, the Federal Reserve (“Fed”) lowered its policy rate by -25 bps for a 2nd consecutive meeting, to a target range of 3.75% - 4.00%, as expected. Such an action was deemed as better balancing the risks to inflation and the labor market.
At the same time, Mr Powell also noted that if the limited inflow of official economic data due to the partial federal government shutdown continues, the Fed will soon be navigating towards its next steps as if “driving in the fog”, which would require a “slowdown”. In that context, Mr Powell noted that another rate cut in the meeting on December 10th is far from certain.
Meanwhile, the Fed decided to terminate the Quantitative Tightening (QT) process as of December 1st, also as expected, judging that reserves have reached the desired levels (“somewhat above” the ones deemed as consistent with “ample reserve conditions”).
Recall that the balance sheet reduction commenced in June 2022 (-$2.3 trillion since then) and has run recently mainly via a reduction of the holdings of Mortgage-Backed Securities (MBS). Compared with 2019 (pre-Covid), the Fed’s balance sheet has declined by $2.4 trillion to $6.6 tn, c. 21% of US GDP versus 19%. Composition-wise, as of December the proceeds from maturing MBS will be reinvested into Treasury Bills.
The ECB stood pat on October 30th (Deposit Facility Rate: 2.00%), as CPI inflation remains roughly in line with the official target (2.1% in October). President Lagarde noted that the EU-US trade deal, the ceasefire in the Middle-East and the recent US-China trade agreement, have mitigated the downside risks to economic growth.
Note that according to the first preliminary estimate for Q3:2025, real GDP rose by +0.2% qoq (+1.3% yoy) from +0.1% qoq (+1.5% yoy) in Q2:2025, somewhat above consensus estimates for +0.1% qoq and the respective most recent (September 11th) ones from the ECB for 0.0% qoq.
The Bank of Japan (BoJ) also stood pat, with the reference interest rate at +0.50%. The guidance for rate increases remained in place, in view of inflation continuing to run above target. In the event, BoJ Governor Ueda implied that a hike may come as soon as at the next meeting on December 19th, as the BoJ will need “a bit more data” on the ongoing wage negotiations in the private sector and will not necessarily await for their final outcome.