Central Banks Meet to Discuss Interest Rates
This week is a big one for central banks around the world. The Federal Reserve (Fed), Bank of Canada (BOC), Norges Bank, Bank of England (BOE), and Bank of Japan (BOJ) are all meeting to discuss interest rates. In the US, employment data has been softer than expected, but not drastic, and inflation data has been rising, but at a slower pace than feared. This gives the Fed a reason to consider cutting interest rates, but not by as much as 50 basis points, as some have predicted.
Economic Data Points to a Goldilocks Scenario
Meanwhile, earnings growth continues, especially in the artificial intelligence (AI) sector. Last week, Oracle announced a forecast of 1,400% growth in cloud revenue over the next four years, which was a big surprise for the market. Overall, economic and earnings data suggest a "Goldilocks" scenario for risk assets, where the economy is growing, but not too fast, and inflation is rising, but not too high.
The Fed is Likely to Cut Interest Rates
The US Consumer Price Index (CPI) inflation data came in mostly as expected, with core CPI rising 0.3% month-over-month and the headline figure rising 0.4% month-over-month. However, the Fed is likely to prioritize the weaker labor market data, including weekly jobless claims, which hit their highest mark in nearly four years. The Federal Open Market Committee (FOMC) will meet this week to discuss interest rates, and it’s likely that they will cut rates, but by how much is still uncertain.
Other Central Banks are Likely to Hold Steady
While the Fed is expected to cut interest rates, other central banks are likely to hold steady. The European Central Bank (ECB) held rates steady last week, and the Bank of England (BOE) is not expected to change policy rates this week. The Bank of Japan (BOJ) is also not expected to hike rates, as inflation remains above target, but tariff uncertainty has been reduced, and exports remain relatively healthy.
Oracle’s Revenue Outlook Surprises the Market
Last week, Oracle announced a stronger-than-expected outlook for its cloud revenue, which surprised the market. The company projected cloud infrastructure revenue to hit $144 billion by fiscal 2030, up from $10 billion in fiscal year 2025. This news sent Oracle’s stock soaring, and it briefly made Larry Ellison, the company’s co-founder, the richest person in the world.
Gold Continues to Shine
Gold continued to make new highs last week, notching more than 30 new record highs this year. If prices continue to rise, 2025 could mark the most new highs for gold in a single calendar year this century. Gold’s enduring appeal as a store of value has been demonstrated by its record-breaking year, and it reached a new inflation-adjusted high last week, surpassing the previous peak from January 1980.
Conclusion
In conclusion, this week’s central bank meetings will be closely watched, as they will set the tone for interest rates and the economy. The Fed is likely to cut interest rates, while other central banks are likely to hold steady. The surprise announcement from Oracle has boosted the AI sector, and gold continues to shine as a store of value. Overall, the economic and earnings data suggest a Goldilocks scenario for risk assets, where the economy is growing, but not too fast, and inflation is rising, but not too high.
