Global PulsePoint

Overview of Conditions

Updated 31 March 2025: As of March 2025, the OECD warns that a combination of persistent inflation, rising trade barriers, and policy uncertainty is weighing on momentum. While the US, Eurozone, and China all face slowing growth, the underlying pressures differ. Inflation dynamics remain uneven, complicating the task for central banks. The OECD has revised its global growth estimate down to 3.1% for 2025 and 3.0% for 2026. The US is expected to slow to 2.2% growth in 2025 and 1.6% in 2026, while the Eurozone remains at 1%, with weak consumer confidence and high energy costs. China’s expected slowdown to 4.8% in 2025 and 4.4% in 2026 reflects structural challenges and external pressures, including trade disputes with major economies.

Inflation dynamics remain mixed. In the US, inflation held at 2.8%, though price pressures in services and housing complicate the Federal Reserve’s policy outlook. In the Eurozone, inflation stands at 2.3%, with core inflation at 2.6%, limiting the ECB’s flexibility in easing monetary policy. In China, deflationary pressures persist, with the consumer price index falling by 0.7% year-on-year. Central banks remain cautious in their policy approaches. The Federal Reserve has held interest rates steady at 4.25–4.5%, balancing inflation control with trade-related economic uncertainties. The ECB lowered its key interest rates—setting the deposit facility at 2.50%, the main refinancing operations rate at 2.65%, and the marginal lending facility at 2.90%— signalling an effort to keep supporting growth amidst ongoing challenges. The Bank of England has maintained rates to 4.5% as stagnation persists, while China’s central bank has kept its benchmark rate at 3.1%, prioritising financial stability amid deflationary concerns.

The OECD warns that escalating trade restrictions, geopolitical tensions, and economic fragmentation could further weaken global investment and spending. The outlook remains increasingly uneven, where policymakers face a complex balancing act in addressing inflationary pressures, trade disruptions, and financial stability risks to sustain global economic momentum.

See below for more detail on current global business conditions.

Financial Conditions

In this section, we examine interest rates, inflation, and stock market performance in the Eurozone, UK, US and China using data from the European Central Bank, Federal Reserve, Bank of England and the Peoples Bank of China; and stock market performance using data from The Euro Stoxx 50, S & P 500, FTSE 100, and CSI 300.

Interest Rates & Inflation

The bottom line:

Monetary policies reflect diverging strategies as central banks navigate inflation, trade risks, and geopolitical uncertainty. The Federal Reserve’s decision to hold rates at 4.25% - 4.50% signals that inflation remains a key concern, outweighing political and market pressures for cuts. Powell’s cautious stance suggests that the US economy may struggle if borrowing costs remain high, limiting investment and consumer spending. In the Eurozone, the ECB lowered its key interest rates—setting the deposit facility at 2.50%, the main refinancing operations rate at 2.65%, and the marginal lending facility at 2.90%—signalling a shift toward supporting growth.
However, risks persist, with potential US tariffs and weak industrial output continuing to weigh on the recovery. While the cut aims to ease financial conditions, the ECB remains cautious, stressing that future moves will depend on inflation trends. The UK maintained its rate at 4.5%, signalling stagnation concerns, but with sluggish investment, its effectiveness may be limited. Meanwhile, China’s steady 3.1% rate signals a focus on stability over stimulus, as trade tensions with the US and weak demand pose risks.

The March 2025 data reveal persistent inflation asymmetries, complicating central bank strategies. In the US, February’s CPI increased by 0.2%, bringing annual inflation to 2.8%. This trend suggests moderation in inflation rather than renewed price pressures, particularly in services and housing, challenging expectations of a smooth disinflation and constraining the Fed’s policy flexibility. The Euro area annual inflation fell to 2.3%, down from 2.5% in January. However, services inflation remained elevated limiting the ECB’s room for further rate cuts despite weak demand. In the UK, inflation fell to 2.8%, easing pressure on the Bank of England and strengthening the case for rate cuts later this year. Meanwhile, China slipped into deflation, with its February CPI falling -0.7% year-on-year, the first negative reading in over a year. The deflationary trend complicates the Chinese policy path: while further easing may be necessary, the space for bold stimulus remains narrow amidst structural and growing debt concerns.

Source: Ibec Global original chart based on the Consumer Price Index Summary of the US Bureau of Labor Statistics; Eurostat; UK’s Office for National Statistics; China National Bureau of Statistics, Consumer Price Index.

Interest Rates (as of March 2025) 

Source: Ibec Global original chart based on the Consumer Price Index Summary of the US Bureau of Labor Statistics; Eurostat; UK’s Office for National Statistics; China National Bureau of Statistics, Consumer Price Index.

Financial Markets

The bottom line:

As of March 2025, equity markets remain fragmented, shaped by diverging economic fundamentals and policy directions. In the US, the S&P 500 has seen a modest recovery after continuous declines in late February and early March, but sentiment is weighed down by a $4 trillion loss in market value amid renewed tariff threats and inflation risks. The UK’s FTSE 100 remains stable but under pressure as global trade tensions and recession fears offset energy sector strength. European markets have entered 2025 on firmer ground, supported by rate cut expectations and selective fiscal momentum, with Spain and Germany outperforming amidst banking resilience and recovering tourism. However, weak industrial output and fragile energy policy remain key structural challenges. In China, the CSI 300 has rebounded on stimulus optimism, but deflation, subdued domestic demand, and demographic headwinds continue to weigh on sentiment. Further easing is likely, though doubts persist over the effectiveness of current policy tools and broader stimulus efforts.

Bond Markets

Source: Ibec Global original chart based on Germany 10Y Bond; UK 10Y Bond; US 10Y Bond and China 10Y Bond.;
Note: The German 10-year Bund is considered the Eurozone’s benchmark bond, valued for its strong role in ECB policy decisions as a key indicator of market conditions.

Source: Ibec Global original chart based on the stock prices of Euro Stoxx 50, FTSE 100, S&P 500 and CSI 300.

Global bond markets are revealing diverging economic undercurrents across major economies. In the US, yields have come off their recent highs, a shift that signals softening growth momentum and uncertainty. In Europe, Germany’s 10-year Bund yield has risen notably in recent weeks, following a historic fiscal expansion that appears to be recalibrating market expectations. UK yields remain elevated, reflecting lingering inflationary pressures and uncertainty around the pace of monetary easing. Meanwhile, China’s bond yields have held relatively steady after a gradual decline through 2024, suggesting a more stable outlook—at least in terms of market expectations.

Trade

In this section, we examine the value of exports using data from the World Trade Organisation.

The bottom line:

As of March 2025, global trade faces renewed headwinds, despite the WTO maintaining its 3% growth forecast. Tensions have escalated following President Trump’s increase of tariffs on all Chinese imports from 10% to 20%, prompting a retaliatory response from Beijing, which imposed new tariffs of up to 15% on US agricultural products, including soybeans, pork, and wheat.
The EU is negotiating with the US to ease newly implemented tariffs of up to 25% on European steel and aluminum, while delaying its countermeasures on US exports until April to allow more time for talks. Tariff escalation continues to constrain value-added exports and industrialisation, particularly in developing economies. Overall, rising protectionism, tariff volatility, and fragmented policy responses threaten to undermine trade flows, reinforcing the need for stronger coordination and reform.

Source: Ibec Global original chart based on the data from the April 2024 WTO Global Trade Outlook and Statistics.