SNB cut the interest rate to 0.25%. Inflationary pressures are easing in Hong Kong and Malaysia

On Thursday, the Dow Jones (US30) Index was down 0.03%. The S&P 500 Index (US500) decreased by 0.22%. The Nasdaq Technology Index (US100) fell by 0.33%. The US stocks closed lower on Thursday, ceding some of the previous session’s gains as investors reassessed economic risks and the Federal Reserve’s response to potential inflation and slowing growth. Market sentiment remained cautious after the US Federal Reserve left rates unchanged but raised its inflation expectations while cutting its economic growth outlook.

The Mexican peso (MXN) weakened to more than 20.2 per US dollar, down from a four-month high reached on March 18, amid a rebound in the US dollar and the threat of tariffs that cast a shadow over Mexico’s growth prospects. The Organization for Economic Cooperation and Development warned that sustained US tariffs on Mexican products could trigger a recession, predicting the economy would shrink 1.3% in 2025 and 0.6% in 2026 if the duties remain unchanged.

Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE40) was down 1.24%, France’s CAC 40 (FR40) closed 0.95% lower, Spain’s IBEX 35 (ES35) Index was 0.76% cheaper, and the UK’s FTSE 100 (UK100) closed down 0.05%. The FTSE 100 index fell on Thursday as investors reacted to the Bank of England’s decision to keep interest rates at 4.5% and its cautious approach to future rate cuts. The Central Bank signaled it will continue to pursue a “gradual and cautious” strategy, maintaining its stance until further evidence of economic progress emerges.

The Swiss franc weakened to 0.88 per dollar after the Swiss National Bank (SNB) cut its key rate to 0.25%, the lowest level since September 2022. While the move was largely expected and the Central Bank refrained from committing to a specific policy path, the Central Bank noted that lower borrowing costs are appropriate to ensure that monetary conditions are consistent with low inflationary pressures. The move also prevents excessive appreciation of the franc as geopolitical risks, stable inflation in Switzerland, and uncertain economic policy in the US increase demand for the currency.

Sweden’s Riksbank kept the rate at 2.25% in March 2025, in line with expectations, citing virtually unchanged projections for inflation and economic growth. Policymakers said inflation is expected to remain above target through the end of the year but should stabilize around 2% in 2026.

The Reserve Bank of South Africa left the repo rate unchanged at 7.5% at its March 2025 meeting as risks to economic stability warrant caution. Inflation, although contained, has still risen, with goods inflation remaining low and services inflation rising. Inflation was steady at 3.2% in February, the highest in four months. The Central Bank expects core inflation to be 3.6% this year and 4.5% next year.

OPEC+ announced production cut plans for seven members, which will reduce output by 189,000-435,000 bpd monthly through June 2026. Production cuts by Kazakhstan, Iraq, and Russia are expected to offset the renewed production plans through next year.

Asian markets were predominantly down yesterday. Japan’s Nikkei 225 (JP225) was not trading yesterday, China’s FTSE China A50 (CHA50) fell by 0.98%, Hong Kong’s Hang Seng (HK50) lost 2.23%, while Australia’s ASX 200 (AU200) was positive 1.16%.

Hong Kong’s annual inflation rate eased to 1.4% in February 2025 from January’s four-month high of 2%. On a month-on-month basis, consumer prices fell by 0.1% in February, reversing a 0.4% rise in the previous month.

Malaysia’s annualized inflation rate eased to 1.5% in February 2025 from 1.7% in the previous two months, the lowest since January 2024 and in line with market estimates. Core Consumer Prices, excluding volatile fresh food and administrative costs, rose to 1.9% y/y, the highest in six months, after rising 1.8% in January. On a month-on-month basis, consumer prices rose by 0.5%, the sharpest pace in a year.