Next week, the focus has turned to the US growth and Personal Consumption Expenditures (PCE) price index data to be announced in the USA.

While the fight against inflation continues under recession concerns worldwide, the potential impacts of tariffs imposed by President Trump on the economy last week continued to influence market direction. The Fed, on Wednesday, kept the policy rate unchanged at 4.25-4.50 percent as expected. Fed Chair Powell mentioned that tariffs could slow down progress in fighting inflation, and Trump’s call for a rate cut through social media raised concerns about a potential disagreement between Trump and the Fed leadership in the future. The Fed’s decision to keep its predictions regarding the federal funds rate unchanged indicated the possibility of two rate cuts this year, while it was reported that the unemployment rate stabilized at a low level in recent months, and labor market conditions remained robust. The statement noted that inflation continued to stay somewhat higher. Additionally, in the announcement stating that the balance sheet reduction pace would be slowed down, it was mentioned that the Committee would reduce the monthly cap on Treasury securities redemption from $25 billion to $5 billion starting from April and keep the monthly cap on mortgage-backed securities at $35 billion.

WILL THE FED CUT RATES? Following these developments, the likelihood of the Fed cutting rates in June was priced at 89 percent in the money markets, while predictions that the Bank would cut a total of 2 rates this year remained strong. Analysts suggested that next week’s growth and personal consumption expenditures price index data to be announced in the country could cause changes in the aforementioned pricings, pointing out that the expectation was for the US economy to show a 2.3 percent growth in the 4th quarter. Moreover, on Friday, Trump’s indication that tariffs could be “flexible” and his statement that they were open to negotiations on customs duties with China supported the stock markets. Last week, contacts between the US and Russia to end the Russia-Ukraine conflict created some optimism to a limited extent. Trump emphasized in his statement on the matter that his phone call with Russian President Putin went very well and productively, using the words, “We agreed immediately on an immediate ceasefire in all areas of energy and infrastructure.”

“TOO MUCH UNCERTAINTY” While Fed officials’ statements were being closely followed, New York Fed President John Williams pointed out that there was currently too much uncertainty in the economy and politics, indicating that many different economic scenarios were possible. Williams stressed that the Fed was not in a hurry to make its next monetary policy decision and noted that predicting the outlook had become more challenging. Chicago Fed President Austan Goolsbee reported that there was significant concern among business circles, stating that projects and investment expenditures were expected to wait until tariffs and other fiscal policies were resolved. Additionally, last week, the Organisation for Economic Co-operation and Development (OECD) published the Mid-term Economic Outlook Report titled “Guidance in Uncertainty”. The institution lowered its forecast for global economic growth for this year by a downward revision of 0.1 percent to 3.1 percent, while it estimated that global economic growth would be 3 percent in 2026. The report predicted that growth in the US, at 2.2 percent this year, would slow to 1.6 percent in 2026.

BUYING DOMINATES IN THE MARKETS As a bullish trend prevailed in the bond markets, the US 10-year Treasury bond yield ended the week at 4.25 percent, recording a decrease of approximately 10 basis points. The dollar index, which fell to 103.