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BoE Dove Beaten Into Submission

• The BoE unsurprisingly held its policy rate at 4.5% in March, preserving its gradual easing path after resilient recent data. Only one MPC member dissented for a 25bp cut.
• Catherine Mann did not carry the extra 25bp of easing she supported from February to March. Her hyperactive vote relied on so little spurious evidence it was swiftly falsified.
• Core members emphasise the lack of a predetermined path, raising the hurdle to a May cut, but this remains the most likely outcome, even if it may require a rapid reversal.

By Philip Rush

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.

Japan: Policy Rate Held At 0.5% (Consensus 0.5%) in Mar-25

• The Bank of Japan held its uncollateralised overnight call rate at around 0.5%, in line with expectations, reflecting a moderate economic recovery and sustained inflationary pressures.
• Core CPI inflation remains at 3.0-3.5% year-on-year, with underlying inflation expected to gradually rise towards the BoJ’s target by 2025, driven by a tightening labour market and wage-price dynamics.
• The BoJ remains data-dependent, with policy direction contingent on wage growth sustainability, yen depreciation effects, and global economic risks, suggesting a cautious approach to normalisation.