MARKET REVIEW
European Central Bank (ECB): The ECB Governing Council voted unanimously to maintain its key deposit rate at 2%, as widely expected. ECB President Christine Lagarde commented that the war in the Middle East “has made the outlook significantly more uncertain, creating upside risks for inflation and downside risks for economic growth,” but that eurozone inflation expectations are “well anchored”. Meanwhile, the annual euro area Harmonised Index of Consumer Prices (HICP) inflation rose to 1.9% in February, up from January’s 1.7%, in line with expectations. GDP data showed 0.2% quarter-on-quarter expansion in the eurozone in the fourth quarter of 2025, with Spain (0.8%) leading the way among the larger of the region’s economies. By contrast, the German and French economies acted as laggards. The ZEW Economic Sentiment Indicator dropped to its lowest level in 11 months, falling from 39.4 in February to -8.5 in March, far beneath expectations of 24. Meanwhile, consumer confidence fell to lowest level since October 2023, as the conflict in Iran weighed on sentiment.
Swiss National Bank (SNB): The SNB kept its policy rate at 0% in March 2026, maintaining caution amid geopolitical uncertainty and subdued inflation. It reiterated readiness to intervene in currency markets to curb excessive franc appreciation. Manufacturing activity rebounded strongly, with the procure.ch PMI rising to 53.3 in March, from 47.4 in February, signalling expansion for the first time in over three years, though manufacturing employment continued to contract. However, the KOF Economic Barometer fell to 96.1, below its long-term average, indicating weaker near-term growth prospects, especially for manufacturing and exports. The unemployment rate rose to 3.2% in January and February, mainly due to seasonal factors. Inflation stayed low, with headline consumer prices up 0.2% year on-year in February and core inflation at 0.4%, well within the SNB’s price stability range. Consumer sentiment was weak but stabilising, with the SECO index at –30 points in February, marginally better than a year earlier. Swiss GDP grew 0.2% quarter-on-quarter in Q4 2025, following a previous contraction, while annual growth slowed to 0.8%, reflecting a subdued macroeconomic outlook.
UK Bank of England (BoE): At its March meeting, the BoE Monetary Policy Committee (MPC) voted unanimously to leave the bank rate unchanged at 3.75%, as widely expected. In addition, MPC policymakers indicated inflation may reach up to 3.5% over the next two calendar quarters, according to BoE staff projections. However, BoE Governor Andrew Bailey commented that he would “caution against reaching any strong conclusions about us raising interest rates…The right place to be is on hold”. Elsewhere, headline inflation rate remained at 3% in February, in line with expectations, while the core rate edged higher to 3.2%. However, the unemployment rate increased to 5.2%, its highest level in almost five years. Meanwhile, average earnings growth fell back to 3.9% year-on-year (including bonuses) for the three months to January 2026. The GfK Consumer Confidence Barometer fell to –21 in March, down from -19 recorded in February. Likewise, month-on-month retail sales volumes fell by 0.4% in February, ahead of forecasts of a 0.7% fall in volumes.
US Federal Reserve (Fed): The Federal Open Market Committee (FOMC) voted 11-1 to keep US interest rates unchanged at 3.5% 3.75%, citing uncertainty due to the Middle East. Fed Chair Powell praised economic resilience but warned the Iran conflict could push inflation up and dampen spending and jobs. Fed officials raised their US GDP growth forecast for 2026 from 2.3% to 2.4%. The dot plot showed the median federal funds rate projection at 3.4% by the end of 2026, unchanged from December. Meanwhile, the Manufacturing Purchasing Managers Index (PMI), as reported by the Institute of Supply Management (ISM), edged down in February from 52.6 in January to 52.4, yet still marked a second consecutive month of growth. Likewise, the ISM Services PMI jumped to 56.1 on February, up from January’s 53.8 and well above expectations of 53.5. Elsewhere, the annual Consumer Price Index (CPI) inflation rate held steady at 2.4% in February, as expected, with annual core CPI inflation (which excludes more volatile items, such as food and energy) also unchanged at 2.5%. Meanwhile, annualised GDP growth in the fourth quarter reached 0.7%, downwardly revised from initial estimates of 1.4% on cooler than expected consumer and government spending and beneath the 4.4% rate recorded in the previous quarter. In employment data, non-farm payrolls indicated that the US economy lost 92,000 jobs in February, a significant decline from January’s downwardly revised gain of 126,000 and far below estimates of a 59,000 rise. Consumer confidence remained relatively robust but declined during the month, with the University of Michigan Consumer Sentiment Index falling to 53.3, down from 56.6 in January, and below the preliminary estimate of 5.5%.
Figure 1: Central bank rates history and future market pricing1
Key interest rates and global data1
