Japan's core inflation rose to 3.2% in March, marking the third straight year above the Bank of Japan's 2% target, fueled by surging rice prices. BOJ Governor Kazuo Ueda signaled more rate hikes could follow if underlying inflation continues climbing, though uncertainty over US tariffs may complicate the outlook.

US President Donald Trump has said he is confident the US will strike a trade deal with Europe before his 90-day tariff pause expires, as talks with top global economies accelerate. He also downplayed China's influence, vowing a "very good deal" with Beijing and aligning with Italy's Giorgia Meloni on energy and defense cooperation.

The European Central Bank has reduced its benchmark interest rate by 25 basis points to 2.25% in response to the economic impact of President Donald Trump's tariffs. ECB President Christine Lagarde highlighted the "exceptional uncertainty" facing the eurozone economy and emphasized the bank's commitment to bringing inflation down to its 2% target.

The dollar's safe-haven status is under scrutiny as it weakens amid President Donald Trump's trade policies. From April 2 to April 16, the S&P 500 fell 7%, while the WSJ Dollar Index dropped 4%. Investors are turning to alternative safe havens such as gold and the yen, both of which have risen significantly. The shift could have long-term implications for the US economy, particularly in financing fiscal deficits.

Treasury yields climbed Thursday in a low-volume session, with long bonds leading the sell-off as rising oil prices and weak TIPS demand lifted inflation expectations. A steepening curve mirrored similar moves in Europe, while President Donald Trump's renewed criticism of Federal Reserve Chair Powell added uncertainty around US rate policy.

International Monetary Fund Managing Director Kristalina Georgieva has warned that uncertainty surrounding global trade policies under President Donald Trump is "off the charts," with tariffs expected to affect global growth, increase prices and destabilize financial markets. Georgieva notes that the IMF will lower growth estimates but not predict a recession.

Banks are increasingly lending to nonbank lenders amid sluggish overall loan growth. The strategy allows banks to manage risk better and free up capital for more profitable activities, but regional banks without trading arms face challenges in maintaining profitability.

The US Federal Reserve has proposed changes to stress tests for major banks, including averaging results over two years and delaying the stress-capital buffer requirement's effective date to Jan. 1. Governor Michael Barr criticized the changes, saying they could give a false sense of security, while Governor Adriana Kugler expressed concern about reduced sensitivity to current economic conditions.

President Donald Trump has expressed reluctance to further increase tariffs on China, citing concerns about hindering trade. Speaking from the Oval Office, Trump noted that Chinese officials, possibly at the behest of President Xi Jinping, have reached out to initiate talks. Currently, the US has imposed 145% tariffs on Chinese goods, with China retaliating at 125%. Trump is optimistic about reaching a trade deal that includes the sale of TikTok's US assets.

AFME is pleased to announce the fifth Annual European Financial Integration Conference in May 2025. Bringing expertise in European capital markets, financial regulation, and economic and monetary policy. Taking place in the financial centre of Frankfurt, this conference will bring together leading policy makers and opinion-formers, as well as influential members of the regulatory and business community, for a day of thought-provoking content and discussion. This event is free to attend and spaces are limited to two per organisation. All registrations are subject to AFME approval.