---
title: "Global Markets React to Central Banks’ Cautious Stance on Interest Rates"
publisher: "Stockmark.IT"
author: "Stockmark.IT Website"
published: "2025-03-21T09:45:07+00:00"
modified: "2025-03-21T09:45:07+00:00"
date: 2025-03-21
canonical: "https://stockmark.it/global-markets-react-to-central-banks-cautious-stance-on-interest-rates/"
category: "Inflation"
categories: ["Inflation", "Interest rates"]
image: "https://i0.wp.com/stockmark.it/wp-content/uploads/WhatsApp-Image-2025-02-04-at-17.33.11.jpeg?fit=1024%2C576&quality=89&ssl=1"
format: "news"
language: "en-GB"
---

# Global Markets React to Central Banks’ Cautious Stance on Interest Rates

**Published:** March 21, 2025
**Author:** Stockmark.IT Website
**Categories:** Inflation, Interest rates
**Featured image:** ![A person with a serious expression is standing against a backdrop of the American flag, wearing a dark suit and red tie. The flags stars and stripes are prominently displayed in the background.](https://i0.wp.com/stockmark.it/wp-content/uploads/WhatsApp-Image-2025-02-04-at-17.33.11.jpeg?fit=1024%2C576&quality=89&ssl=1)

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Stock markets across the globe retreated this week as central banks in major economies opted to hold interest rates steady amidst uncertainty sparked by US tariff policies. The Federal Reserve, the Bank of England, and central banks in Japan and Sweden emphasised the potential for resurgent inflation caused by the upcoming tariffs, maintaining a cautious approach to monetary policy.

The US Federal Reserve downgraded its growth forecast for 2025 from 2.1 per cent to 1.7 per cent, citing unpredictable shifts in policy linked to Washington’s tariff proposals. Federal Reserve Chairman Jerome Powell commented on the difficulty of assessing long-term outcomes, referring to anticipated economic disruptions associated with increased tariffs and broader fiscal decisions.

Equity markets reflected the unease, with European stocks posting significant losses. Germany’s Dax index, which has been among the year’s top performers, led the declines with a 1.5 per cent drop. France’s CAC 40 fell by 1 per cent, while the FTSE 100 shed 0.1 per cent, breaking its six-day winning streak. US markets also dipped, with the S&P 500 and Nasdaq edging lower by 0.2 per cent and 0.3 per cent, respectively.

Investors moved towards safer assets as risk-off sentiment spread. Government bonds rallied, with US Treasury yields falling by four basis points to 4.2 per cent and the UK gilt yield dropping three basis points to 4.63 per cent. Gold prices continued their upward trajectory, rising 0.1 per cent to hit a record $3,040 per ounce, marking a 7 per cent gain this month alone.

The Bank of England’s decision to maintain interest rates at 4.5 per cent was attributed to concerns over market volatility and inflationary pressures. Meanwhile, long-term inflation expectations in the UK reached 3.9 per cent in February, up from 3.5 per cent in January, according to a Citigroup and YouGov survey. Analysts expect headline inflation to peak at 3.75 per cent later this year, bolstering the position of hawkish monetary policymakers.

Policy responses to tariff-induced uncertainty remain a contentious issue. US President Donald Trump called on the Federal Reserve to reduce rates further, arguing this would help the economy withstand the effects of rising trade barriers. However, central banks continue to express caution, warning that higher tariffs could exacerbate inflationary trends and limit their room for manoeuvre.

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