Weekly Market Round-Up (4-10 May, 2025) - Central Bank in Focus

GordonGekko
May 11
3 min read

The week was marked by significant developments in monetary policy as central banks across the globe responded to escalating trade tensions and evolving economic indicators. Here's a concise overview of the seven most impactful events that shaped the financial landscape:

Central Banks Take Center Stage: Asia's Monetary Moves Amid Global Trade Tensions

1. People's Bank of China Implements Targeted Stimulus

In response to mounting economic pressures from the ongoing trade war with the United States, the People's Bank of China (PBoC) announced a series of monetary easing measures on May 7. These included a 0.1 percentage point cut to the benchmark seven-day repo rate, bringing it to 1.4%, and a 0.5 percentage point reduction in the reserve requirement ratio (RRR) for banks, effective May 15.

This move is expected to inject approximately RMB 1 trillion ($138 billion) into the banking system. Additional initiatives aimed to support exporters and the struggling property sector, signalling Beijing's commitment to stabilizing the economy ahead of renewed trade talks with the U.S.

2. Bank of England Cuts Interest Rates Amid Trade Concerns

On May 8, the Bank of England reduced its base interest rate by 0.25 percentage points to 4.25%, marking the fourth cut since August 2024. The decision, influenced by the economic ramifications of global trade tensions, particularly those stemming from U.S. tariffs, aimed to bolster the UK's sluggish growth prospects. The Monetary Policy Committee exhibited a rare split, with differing opinions on the magnitude of the rate cut, reflecting the prevailing uncertainty.

3. Taiwan's Currency Surge Amid Trade Optimism

Taiwan's central bank addressed market speculation following a significant appreciation of the Taiwan dollar, which saw its largest one-day gain since 1988. The surge was attributed to foreign capital inflows and optimism surrounding potential easing of trade tariffs. Central Bank Governor Yang Chin-Long clarified that there were no U.S. demands influencing Taiwan's currency policy, emphasizing the nation's commitment to maintaining a stable foreign exchange environment.

4. Bank Negara Malaysia Maintains Policy Rate, Adjusts Reserve Requirements

Bank Negara Malaysia decided to keep its Overnight Policy Rate unchanged at 3.00% during its May 8 meeting. However, acknowledging potential economic slowdowns due to global trade tensions, the central bank announced a reduction in the statutory reserve requirement ratio by 100 basis points to 1.00%, effective May 16. This move aims to provide additional liquidity to the banking system and support economic stability amid external uncertainties.

5. Bank of Korea Signals Potential Rate Cuts Amid Currency Volatility

Bank of Korea Governor Rhee Chang-yong indicated that the central bank might consider lowering interest rates to stimulate the economy, as the Korean won experiences continued volatility against the U.S. dollar. The nation's economic outlook is further complicated by domestic political instability and upcoming presidential elections, adding layers of uncertainty to monetary policy decisions.

6. Federal Reserve Holds Interest Rates Steady Amid Rising Uncertainty

On May 7, the Federal Reserve maintained its benchmark interest rate at 4.25% to 4.5% for the third consecutive meeting. Chair Jerome Powell cited increased risks of both inflation and unemployment, a challenging combination known as "stagflation," largely attributed to the Trump administration's recent tariff implementations. The Fed emphasized a cautious, data-dependent approach, awaiting clearer economic indicators before making further policy adjustments.