This week is defined by major central bank decisions, underscoring the tension between lingering inflation risks and a gradually weakening growth outlook. The Fed is expected to hold steady while hinting at future easing, influenced, partly, by political expectations. The ECB may take the first step towards rate cuts, while the BofE remains caught between inflation persistence and economic softness.
Markets will be driven less by the rate decisions themselves and more by forward guidance, as investors look for clarity on the timing and pace of the next easing cycle.
USD: Fed Interest Rate Decision
April 29, 21:00 MT time
The Federal Reserve is widely expected to keep rates at 3.75%, but the real focus will be on guidance rather than the decision itself. Inflation fears have not fully disappeared, particularly with renewed energy pressures and supply-side risks feeding into expectations. However, signs of moderation in growth and a gradual cooling in the labor market are shifting the balance.
Markets are also increasingly pricing in the potential appointment of Kevin Warsh, seen as more dovish, which introduces a political dimension to monetary policy expectations. As a result, the Fed is likely to adopt a more cautious and flexible tone, signalling readiness to ease later in the year without committing to immediate action.
Affected instruments: all
GBP: UK Interest Rate Decision
April 30, 14:00 MT time
The Bank of England faces a more complex trade-off. The UK inflation exceeds the target, particularly within the services sector, and energy costs continue to pose upside risks. At the same time, economic growth is fragile, with consumer demand showing exhaustion under the weight of higher borrowing costs.
A hold at 3.75% is the most probable outcome, though the tone is likely to shift towards gradual easing. Policymakers are increasingly aware that maintaining the current tight policy for too long could deepen the slowdown. While an immediate cut may be unlikely, forward guidance could signal that the next move is downward, dependent on continued progress in inflation.
Affected instruments: GBPUSD, GBPJPY, EURGBP, and other GBP-pairs.
EUR: Eurozone Interest Rate Decision
April 30, 15:15 MT time
The European Central Bank appears closest to initiating an easing cycle. Inflation has been steadily declining across the eurozone area, although core inflation remains somewhat persistent. Meanwhile, the growth continues to lag, reinforcing the case for policy support.
A cut to 2.00% is increasingly plausible, though the ECB may choose to proceed cautiously to avoid signalling an extra-hawkish easing path. Markets are already positioned for gradual rate reductions, and any confirmation of this trajectory would likely reinforce expectations of a prolonged easing cycle across the region.
Affected instruments: EURUSD, EURGBP, EURJPY, and other EUR-pairs.
