Economy Spotlight The Most Important Events and What's Coming 24-30/03/2025

Introduction:

A very important week unfolded across various markets last week, with several important decisions issued by major central banks, led by the US Federal Reserve, which delivered a wealth of data, some of which were positive for investors.

The global economy also witnessed a series of events and news that cast a shadow over various markets and assets. This week's "Economy Spotlight" report covers all these events, in addition to highlighting the most important developments awaiting markets in the final week of March 2025, specifically the US economic index, which will be released at the end of this week.

Economy Spotlight. Major Economies:

First. The US Economy:

Markets focused on this month's Federal Reserve meeting, before the hiatus until May. This meeting comes amid heightened economic uncertainty and growing fears of the repercussions of a potential trade war driven by the tariffs Trump has imposed since taking office.

As expected, the Fed left interest rates unchanged but acknowledged the increased risks to both economic growth this year and inflation and raised inflation expectations. It also sent reassuring signals about the labor market, which it viewed as remaining strong. The most positive development for investors was the Fed's announcement of a slowdown in its balance sheet drawdown, known as quantitative tightening (QT), indicating that the Fed still believes that monetary policy changes will remain a goal for the foreseeable future.

This meeting came amid significant mixed economic data. Retail sales rose well in February after a marked contraction in January. Industrial production also improved, while home construction costs, a key component of US inflation, rose. Regarding investor sentiment, Bank of America indicated that fears of stagflation, trade wars, and the end of US stimulus policy will lead to a decline in US investor sentiment. This may be better illustrated this week by the Consumer Confidence Index, which last month recorded its lowest reading since April 2024.

US President Donald Trump continues to insist that tariffs will take effect on April 2 for the European Union and other countries, despite assurances from both the US Treasury and Commerce secretaries that there is a possibility of either negotiating or imposing tariffs at varying and fair rates with other countries.

The US economy also saw some positive news regarding the business environment, with several companies and parties stating that they intend to inject billions of dollars into the US economy over the coming years. In addition, the White House announced that the UAE is committed to a ten-year investment framework worth $1.4 trillion in the United States, following a meeting between senior Emirati officials and President Donald Trump this week. Regarding important economic indicators, the US economy will witness several, most notably the first inflation test after the Federal Reserve meeting, particularly the core personal consumption expenditures price index, which is the Federal Reserve's preferred indicator for monitoring inflation.

Second. European Economy:

Tariff concerns continue to surround the European economy, especially with the US President's confirmation that they will be implemented on the scheduled date of April 2nd. This is something European Central Bank President Christine Lagarde warned against when she stated at the end of last week that any trade war with the United States would severely damage the eurozone economy and could lead to a significant increase in inflation.

Despite these concerns, the European economy received some positive news last week, most notably from its largest economy, after the vote on the massive German budget bill, which aims to allocate more than $547 billion to defense and infrastructure.

In addition, in a first step indicating that the European Union and its leaders are open to international cooperation and partnership to confront Trump's tariffs, the new Canadian Prime Minister, Mark Carney, met with the leaders of Britain and France during his first official visit abroad. The European economy witnessed several economic events last week, particularly regarding central bank decisions. The Bank of England did not cut interest rates for the second time, maintaining them at 4.5%, while emphasizing concerns about the impact of mutual tariffs between the US and various countries. The same applies to the Bank of Sweden, which maintained interest rates at 2.25% for the second time, expressing the same concerns as the UK. The Swiss National Bank was the only major central bank to cut interest rates for the fifth consecutive time, bringing them close to the zero range (0.25%).

Third. Japanese Economy:

The Bank of Japan did not raise interest rates, in line with previous expectations, but the meeting was divided over the timing of the next interest rate hike to address still-high inflation. Analysts indicated that the June meeting may lead to the next rate hike, so that Japanese policymakers can be reassured that rising wages continue to support the Japanese economy and domestic consumption.

Regarding risks, the Governor of the Bank of Japan stated that it is difficult to determine the extent of the risks to the Japanese economy resulting from the tariffs. Despite the good meetings between the Japanese and American sides, Japan has been unable to obtain tariff exemptions from the US.

Japan and China also held a high-level dialogue in Tokyo, where both sides emphasized the importance of economic relations between the two countries and highlighted the need to enhance practical cooperation in the economic field. The Japanese side also emphasized the importance of China lifting its restrictions on imports of Japanese agricultural and aquatic products. This dialogue represents a real opportunity at a time when pressure is increasing on both countries due to US tariffs, with the aim of reducing the differences between China and Japan.

Fourth. Chinese Economy:

Chinese media have warned that US tariffs will harm the US economy itself if other countries retaliate with higher tariffs on US goods, leaving the door open for China to take further action as another wave of tariffs approaches in early April.

Dozens of foreign CEOs will also visit China this week to attend a major development conference, with many expected to meet with Chinese President Xi Jinping at the annual China Development Forum, which will be held in Beijing on March 23-24.

Regarding China's efforts to stimulate investment and the domestic economy to support domestic consumption, tech giants such as Tencent, Alibaba, and ByteDance have announced massive spending plans on artificial intelligence infrastructure, in line with the Chinese government's new technology-driven strategy and the global push of Chinese technology.

The Chinese economy witnessed significant economic indicators last week, most notably retail sales, which jumped to their highest level in two months, while unemployment rates rose to their highest level since March 2023.

Economy Spotlight. Economic Calendar and What to Expect in the Markets Next Week:

Global markets will be awaiting the following economic data: