Markets to watch FED and ECB interest rate decisions

During the World Economic Forum in Davos, U.S. President Donald Trump joined via video conference. He delivered important messages aimed at reducing geopolitical risks. His calls to lower oil prices and interest rates helped decrease risk perception among investors. As expectations grow for the Federal Reserve (Fed) to cut interest rates in the first half of the year, many believe the Fed will keep its current rate during next week’s meeting.

Positive Market Trends After Trump’s Tariff Decisions

Global markets showed a positive trend after Donald Trump decided against implementing extensive tariffs. Now, investors focus on the upcoming interest rate decisions from the Fed and the European Central Bank (ECB), which are crucial for market stability.

Trump’s moderate approach toward China and his willingness to negotiate eased some uncertainties about previously announced tariffs on international trade. However, concerns remain about his threats to trade partners like Canada, Mexico, and the European Union (EU). Analysts warn that these tariffs could trigger global trade wars and increase inflationary pressures in the U.S., affecting asset prices.

Fed’s Interest Rate Outlook

Many worry that Trump’s economic and trade policies may conflict with the Fed’s efforts to combat inflation. As a result, the Fed’s upcoming monetary policy decisions and a busy economic data calendar have become the main focus for investors.

Market pricing shows strong expectations for a rate cut by the Fed in the first half of the year. While the bank is likely to keep rates steady this month, there is a 96% chance it will lower the policy rate by 25 basis points in June.

Analysts believe the Fed’s interest rate decision could increase market volatility. They will closely watch Fed Chair Jerome Powell’s comments during the press conference after the announcement for insights into the bank’s future projections.

Focus on ECB’s Interest Rate Decision

In Europe, stock markets showed mixed trading patterns last week. Investors are now turning their attention to the ECB’s upcoming interest rate decision and the remarks from ECB President Christine Lagarde. The outcomes of these decisions will significantly impact the European economy and financial markets.