On February 6, major global central banks ushered in an intensive period of policy decisions. The European Central Bank (ECB) and the Bank of England (BOE) successively announced that they would keep interest rates unchanged, while releasing strong dovish signals, triggering fluctuations in global financial markets and further raising market expectations for interest rate cuts within the year.
The ECB decided on Thursday to keep the deposit rate unchanged at 2%, marking the fifth consecutive suspension of interest rate cuts since last June. ECB President Christine Lagarde said that current inflation is more unpredictable than usual. Under the shadow of a stronger euro and tariffs, the uncertainty of the external environment is increasing, which may exert dual pressures on economic growth and prices. In the follow-up, it will closely monitor inflation trends and economic data to reserve space for subsequent policy adjustments. This decision was in line with market expectations, but Lagarde’s statement further strengthened market expectations for ECB interest rate cuts within the year.
The Bank of England also announced that it would keep interest rates unchanged at 3.75%, but the internal voting result was a close 5:4 in favor of an interest rate cut, releasing a strong dovish signal. Bank of England Governor Andrew Bailey clearly stated that “there should be room for further interest rate cuts this year” and predicted that inflation would fall back to the 2% target level in April. After the decision was announced, the pound fell 0.8% and short-term government bond yields pulled back, reflecting the market’s strong expectations for a BOE interest rate cut.
At the same time, U.S. Treasury bond yields declined significantly. Driven by risk aversion, the 10-year U.S. Treasury bond yield fell 9 basis points to 4.19%, and the 2-year U.S. Treasury bond yield fell 9 basis points to 3.46%, the lowest in nearly a month. In addition, demand for Japan’s 30-year government bond auction picked up, with a bid-to-cover ratio of 3.64, pushing the 30-year yield down 5 basis points to 3.585%, temporarily easing market concerns about Japan’s long-term debt.
The follow-up trend of global central bank policies will become the focus of market attention. With the ECB and BOE releasing dovish signals, the global interest rate cut cycle may gradually start, which will have a profound impact on global stock, bond and foreign exchange markets.
