The Federal Reserve, along with central banks in Brazil, Canada, and Sweden, is widely expected to keep interest rates unchanged this week, signaling caution amid a tense global economic environment. The decision comes despite repeated calls from US President Donald Trump for lower borrowing costs.
Chair Jerome Powell has received backing from over a dozen central bank leaders worldwide, including those at the Bank of England and European Central Bank, reaffirming the Fed’s independence at a time of political pressure from the White House.
Powell and the Fed now face multiple challenges, including grand jury subpoenas and a Supreme Court hearing over the potential dismissal of Governor Lisa Cook. Market instability in Japan, concerns over U.S. foreign policy, and trade disruptions add to the uncertainty facing policymakers.
Bloomberg Economics notes that a majority of Federal Open Market Committee (FOMC) participants are likely to support holding rates steady, signaling unity behind Powell. Governors Christopher Waller and Michelle Bowman are key figures to watch, as their votes could indicate whether the Fed maintains its independence from political influence.
Policymakers are balancing risks to economic growth from tariffs with potential inflation pressures. US unemployment in December declined while inflation remains above target, supporting the case for a pause in rate cuts after three reductions at the end of 2025. Powell is expected to provide limited guidance on future policy during his press conference, allowing time to assess the impact of prior moves.
Data releases this week include the US producer price index, durable goods orders, the trade deficit, and January consumer confidence.
In Canada, the Bank of Canada is expected to hold its policy rate at 2.25%, emphasizing slower growth and uncertainty tied to the US-Mexico-Canada trade agreement. Statistics Canada will release GDP data for November and December, likely indicating weak fourth-quarter output.
Australia will report inflation data ahead of the Reserve Bank’s Feb. 3 meeting, with consumer price growth expected at 3.6% year-on-year, supporting speculation of potential rate hikes. Japan’s inflation reports show moderate underlying pressure, keeping the Bank of Japan on track for further increases. Fourth-quarter GDP data is also due from the Philippines, Taiwan, and Hong Kong.
China will release industrial profits data on Tuesday, reflecting challenges for exporters and domestic industries amid weak demand. Trade and confidence data are also expected from several Asia-Pacific countries, including the Philippines, New Zealand, Sri Lanka, and Thailand.
In Europe, Germany, Spain, France, Italy, and other nations will provide inflation and GDP data, with Germany’s Ifo survey expected to offer insights into industrial and economic momentum. ECB officials will remain largely silent ahead of their Feb. 5 policy meeting.
African central banks are expected to act in various ways, with Ghana likely to cut rates, Mozambique easing borrowing costs, and South Africa possibly reducing its rate slightly. Malawi is expected to maintain a high rate, while Eswatini and Lesotho could diverge.
In Latin America, Brazil will provide inflation and policy updates, while Chile, Colombia, Mexico, and Peru release employment and output data. Colombia is expected to respond to a sharp minimum wage increase with higher rates, reflecting rising inflation expectations.
Global markets will be closely watching these central bank decisions and data releases as policymakers navigate inflation pressures, growth risks, and financial volatility in 2026.