Amid rising global trade tensions, particularly between the ๐บ๐ธ United States and ๐จ๐ณ China, central banks are hinting at potential interest rate cuts to cushion the economic impact. Hereโs whatโs happening:
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๐ Tariff Negotiations Update
๐ค U.S.-China Agreement (May 2025):
U.S. tariffs cut from 145% โ 30%
China slashes tariffs from 125% โ 10%
๐ Temporary 90-day truce in effect
๐ Goal: Reduce global trade uncertainty and inflation pressures
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๐ฆ Central Banks React
๐บ๐ธ Federal Reserve (Fed):
Current Rate: 4.25% โ 4.50%
๐ฆ Cautious on cuts โ watching inflation and global risk factors
๐ Rate cuts possible later in 2025 if trade stability improves
๐ฐ๐ท Bank of Korea:
Cut interest rate to 2.5% ๐ป
๐ GDP growth forecast slashed to 0.8%
๐ Fourth rate cut since Oct 2024
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๐ Market Impact
๐ Global indices rallied after tariff truce
๐ฐ Investors anticipate more dovish monetary policy
โ ๏ธ Still fragile โ renewed tensions could derail optimism
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๐ฎ What to Watch Next
Will the Fed follow South Koreaโs lead?
Can the U.S.-China truce hold beyond 90 days?
How will inflation and economic data steer rate decisions?
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๐ Bottom Line: Global policymakers are walking a tightrope between inflation control and economic stimulus. Trade peace may just unlock the next wave of rate easing.