In recent developments, Bank of Japan board member Toyoaki Nakamura cautioned against raising interest rates, citing mounting risks from U.S. tariffs.

The UK economy expanded by 0.7% in Q1 2025, surpassing expectations of 0.6% and marking its strongest quarterly growth in nine months. The gains were led by services, particularly administrative services (+3.3%) and retail trade (+1.5%), as well as a 1.1% rise in industrial production, driven by transport equipment and machinery. Investment also played a key role, with gross fixed capital formation up 2.9%, supported by aircraft imports and ICT-related spending. Exports rose 3.5%, outpacing a 2.1% rise in imports, while household consumption grew slightly by 0.2%. Year-on-year GDP increased by 1.3%.

Data released on Tuesday showed headline inflation eased to 2.3% in April, marking its lowest level since February 2021 and coming in just below market expectations of 2.4%. On the trade front, investors continued to evaluate the implications of the temporary U.S.-China tariff reduction, which lowers tariffs to 30% and 10%, respectively, for a 90-day period.

The yield on the U.S. 10-year Treasury note held near 4.45% on Tuesday, approaching a one-month high, as easing trade tensions between the U.S. and China reduced demand for safe-haven assets. Over the weekend, both countries agreed to temporarily lower tariffs to 30% and 10% for 90 days, helping to alleviate concerns over an extended trade conflict.

U.S. 10-year Treasury yields climbed to 4.4% on Monday, a three-week high, as optimism over a U.S.-China trade deal reduced safe-haven demand. Talks in Switzerland ended with both sides citing progress. 

President Trump announced a trade deal with the UK, but markets remained cautious as key tariffs stayed at 10%. Focus now shifts to U.S.-China trade talks in Switzerland, with limited expectations for progress. U.S. jobless claims fell to 228,000, indicating labor market resilience.

In May 2025, the Federal Reserve held interest rates at 4.25%–4.50% for a third meeting, citing caution due to rising risks from Trump’s tariffs, including inflation and slower growth. Fed Chair Powell emphasized a patient, data-driven approach. 

The People’s Bank of China (PBoC) announced a 50 basis point cut to the reserve requirement ratio (RRR), potentially injecting CNY 1 trillion into the financial system, and lowered the seven-day reverse repo rate by 10 bps to 1.40%.