The decisions of the governors that make up the Federal Reserve conclave are decisive for the performance of the financial markets. Last year, the Fed The rate reduction began in September to 4%with the precedent of the December 2024 cut that placed it at 4.50%. To the drop in September of 0.25 points, the drop in October was added by another 0.25 points and another in December of another quarter of a point, which places the price of money at 3.50%.
Next week, the March 18 The governors of the different states will meet again to make a decision, although the markets do not expect changes, for now. When the impact of inflation caused by the rise of energy and tariffs on the economy is known, they will decide and, most likely, will end the trend of cuts. Something similar could happen with the European Central Bank (ECB) which holds a meeting a day later, on the 19th March, amid the same uncertainties with oil exceeding $100 a barrel and natural gas skyrocketing.
Although the effect of central banks with rate movements is reflected above all in the shorter maturities, the entire rate curve is affected. Thus, before the first Fed cut in September 2025, US 10-year bonds were trading with a yield of 4.28% and after the three cuts of the last quarter they ended at 4.17%, reaching downward peaks of 3.997%. But now the rates of the most liquid bonds are back to August 2025 levels, so the current uncertainty has amortized the declines experienced.
Trump y Powell
Analysts’ forecasts have changed. In principle, tariffs were the inflationary argument that would lead to stopping the expected cuts in interest rates by central banks and even giving a turn to the increases. And after this forecast, the war in the Middle East has increased these fears due to the forecast of increases in inflation of products and services as a result of increases in energy. Now, it seems even clearer that the types may decide upwards to curb price tensions.
Furthermore, in the case of the United States, the unknown relationship between Donald Trump and the president of the Fed, Jerôme Powell, lies. Trump has already announced the replacement of the highest monetary authority that will be Kevin Warsh and he has always shown a clear predisposition to lower the price of money to reactivate the economy, bypassing the orthodoxy by which the Fed must monitor inflation and the progress of the labor market.
Xavier Chapard, strategist at LBP AM, majority shareholder company of LFDE, on the actions of central banks in the face of the crisis in Iran says that “we think that central banks they will maintain a waiting attitudemaking it clear that they are ready to act if necessary«. He also points out that «the speeches of the members of the ECB since the beginning of the war have unanimously expressed the need to remain calm in the short term” and that “the Fed should be reinforced in its desire to keep rates stable over the coming months and leave the door open to both increases and cuts starting in the summer.”Another consequence of raising rates is the strength of the dollar: The euro is trading at $1.145.