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US: Policy Rate Held At 4.5% (Consensus 4.5%) in Mar-25

• The Federal Reserve held the federal funds rate at 4.25%-4.50%, consistent with expectations, citing increased economic uncertainty and persistent inflation risks.
• Core PCE inflation was revised up to 2.8% for 2025, signalling ongoing inflationary pressures, while GDP growth was downgraded to 1.7%, indicating stagflationary economic forces.
• The Fed will slow balance sheet reduction from April, reflecting concerns over liquidity and financial conditions, while future rate decisions remain data-dependent.

Brazil: 100bp Rate Hike To 14.25% (Consensus 14.25%) in Mar-25

• Brazil's Copom raised the Selic rate by 100bp to 14.25%, as expected, reinforcing its hawkish stance in response to rising inflation expectations and persistent price pressures.
• Despite early signs of moderating growth, upside inflation risks—including resilient services inflation, deanchoring expectations, and external vulnerabilities—justify continued policy tightening.
• Copom has signalled a smaller rate hike at the next meeting. Still, future decisions will remain data-dependent, with inflation expectations and global financial conditions playing a key role in the policy trajectory.

UK Inflation Excess Survives Reweighting

• Updated inflation basket weightings can shift the inflation outlook without any new fundamental shock. The seasonal and trend outlook is unaffected by the 2025 update.
• Although our forecast is broadly unchanged, this still mitigates the risk that reduced weights on energy and sanitation utilities dampen the surge in April and July forecasts.
• This outcome further emboldens our confidence in our above-consensus forecast. We also note that the average import intensity is now weighted near historic lows.

By Philip Rush

EU: Defence Spending

• The EU faces two imminent deadlines in determining defence spending. On 20 March, the Commission presents its full loans-for-arms proposal to a divided European Council, and on 24 March, the ‘old’ Bundestag will step down, after which easing Germany’s debt brake becomes even harder.

By Alastair Newton