Market Round-Up: Central Banks and Trade Developments Shape Global Outlook

Market Round-Up: May 11–17, 2025

Federal Reserve Announces Workforce Reduction

This week, global financial markets experienced significant shifts influenced by central bank decisions, trade negotiations, and economic indicators. Here are the seven most impactful events that shaped the economic landscape:

1. U.S. and China Agree to Temporary Tariff Reduction

In a move to de-escalate ongoing trade tensions, the United States and China agreed to a 90-day reduction in reciprocal tariffs. The U.S. reduced tariffs on Chinese goods from 145% to 30%, while China lowered its tariffs on U.S. goods from 125% to 10%. This agreement led to a surge in global markets, with the Dow Jones Industrial Average rising over 2% in response.

2. Federal Reserve Announces Workforce Reduction

The Federal Reserve revealed plans to reduce its workforce by 10% over the coming years through attrition and a hiring freeze. Chair Jerome Powell stated that this initiative aims to modernize operations and improve efficiency, rather than being a response to external political pressures. This marks the first significant staffing reduction since 1997.

3. Moody's Downgrades U.S. Credit Rating

Moody's Investors Service downgraded the United States' credit rating from Aaa to Aa1, citing concerns over the federal government's persistent failure to control its growing debt. The agency highlighted that federal deficits are expected to rise to nearly 9% of GDP by 2035, up from 6.4% in 2024.

4. Reserve Bank of India Plans Significant Dividend to Government

The Reserve Bank of India (RBI) is expected to transfer a record surplus of approximately ₹3 lakh crore to the Indian government for the fiscal year 2024–25. This anticipated payout represents a nearly 50% increase over the previous year's dividend, providing a substantial fiscal boost to the government.

5. China's Economic Outlook Improves Amid Trade Developments

Following the tariff reduction agreement with the U.S., Goldman Sachs raised its forecasts for China's economic growth. The easing of trade tensions is expected to stimulate Chinese economic activity, although analysts caution that achieving a lasting resolution remains challenging.

6. Bank of Thailand Expresses Limited Policy Flexibility

The Bank of Thailand indicated constrained policy options following two recent interest rate cuts. With the threat of 36% U.S. tariffs looming if no trade agreement is reached, the central bank acknowledged that further rate reductions might not effectively stimulate credit access or investment.

7. Singapore Adjusts Economic Growth Forecast Amid Uncertainty

Singapore's Trade Minister Gan Kim Yong announced that the country's economic growth forecast might need further adjustment due to ongoing global uncertainties, despite recent progress in U.S.-China trade talks. The trade-reliant economy is beginning to slow down, prompting cautious optimism.