(Bloomberg) -- Federal Reserve officials are treading cautiously on interest rates against a backdrop of sturdy US economic activity and a healthy labor market as officials await policy moves from the Trump administration.
During a week full of central bank policy decisions around the globe, Fed officials kept interest rates in a range of 4.25% to 4.5%, while their European counterparts moved forward with another reduction. With the region’s economy stalling and a 2% inflation target within reach, the European Central Bank lowered borrowing costs for a fifth time since June.
US and European economic report cards were also released. The US closed out a solid year of growth, while the euro zone limped into 2025. In China, the economy stumbled at the start of the year, with surveys showing shrinking manufacturing and near-stagnant services activity.
Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy, markets and geopolitics:
World
Aside from decisions from the Fed and the ECB, Sweden’s central bank lowered borrowing costs by a quarter point and signaled its easing campaign may be finished for now. Denmark trimmed rates, as did Pakistan, Mozambique and South Africa. Brazil boosted rates by a full percentage point for a second meeting. Ghana, Sri Lanka, Chile, Hungary, Georgia kept borrowing costs steady. Colombia unexpectedly halted rate cuts as policymakers fret about the worsening fiscal outlook, a large minimum wage hike and tariff threats from US President Donald Trump.
US & Canada
The US economy expanded at a solid pace at the end of 2024, fueled by a generous tailwind from consumer spending that more than offset drags from a strike at Boeing Co. and much leaner inventory investment. Household spending, which comprises the largest share of economic activity, advanced at a 4.2% pace — the first time since late 2021 that outlays have exceeded 3% in consecutive quarters.
The Fed’s preferred measure of underlying inflation remained muted in December and real incomes were soft, which should support further reductions in interest rates this year.
The sudden appearance of DeepSeek — a Chinese AI firm boasting a world-class model developed at bargain-basement costs — triggered a massive selloff in Nvidia and other US tech champions. What matters for the economy, though, is not the ups and downs of stock prices for the Magnificent Seven, but whether AI drives gains in productivity, and how those gains are divided up. For all the excitement, and the trillion-dollar valuations for AI firms, evidence of a boost to productivity remains thin on the ground.
The Bank of Canada reduced borrowing costs by a quarter percentage point and stopped giving guidance on any further adjustments to borrowing costs as the threat of tariffs from the Trump administration clouds the outlook.
Europe
The euro zone unexpectedly stagnated at the end of last year as government collapses in its top two economies bruised confidence among businesses and consumers. Fourth-quarter gross domestic product was unchanged from the previous three months, the weakest quarterly performance of the year. Output fell 0.2% in Germany and 0.1% in France.
Banks in the euro area tightened credit standards for companies by the most since 2023, dashing hopes for a quick recovery in corporate lending that could support investment. At the same time, the poll showed that demand among firms for loans increased again slightly, though remained weak, the ECB said.
Asia
China’s economic activity unexpectedly faltered to start the year, breaking the momentum of a recovery sparked by stimulus measures and underlining the need for Beijing to do more to prevent another slowdown. President Xi Jinping vowed to strengthen the economic recovery and said China plans to deepen its reforms.
The number of foreign workers in Japan reached a new high, underscoring the country’s growing reliance on people from overseas to address its chronic labor shortage. Japan had a record 2.3 million foreign workers as of October 2024, marking a 12.4% increase from the previous year.
Emerging Markets
Over the course of February, African nations representing almost three-quarters of the continent’s gross domestic product are set to stake out different approaches to interest rates, as they weigh the risks of protectionist US policies on their economies and inflation.
Brazil’s jobless rate ticked up slightly at the end of 2024 while remaining near a record low, keeping pressure on the central bank to raise its interest rate further. The unemployment rate edged up to 6.2%.
--With assistance from Matthew Boesler, Maria Eloisa Capurro, Ekow Dontoh, Erik Hertzberg, William Horobin, Lucille Liu, Yujing Liu, James Mayger, Tom Orlik (Economist), Andrew Rosati, Zoe Schneeweiss, Mark Schroers, Randy Thanthong-Knight, Keiko Ujikane, Monique Vanek, Alexander Weber, David Wilcox (Economist) and Erica Yokoyama.
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