International News 06 February 2026
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BoE Holds Rates at 3.75%, Signals Cautious Path Toward Future Cuts
The Bank of England kept its policy rate unchanged at 3.75% following a narrow 5–4 vote, highlighting a growing internal debate over the timing of future easing. Governor Andrew Bailey said interest rates are likely to be cut further over time if the economy and inflation evolve as expected, but stressed that any decision to loosen policy will face increasingly tight scrutiny. Cutting too fast risks prolonging inflation, while waiting too long could trigger a sharper economic slowdown. Bailey added that current market expectations on the rate path broadly align with his view, though uncertainty remains over the timing and scale of any moves. On inflation, Bailey noted that the risk of persistent price pressures is diminishing, supported by slowing wage growth and staff analysis suggesting no lasting structural shift in wage-setting behavior. However, he emphasized the need for more evidence that underlying inflation is sustainably returning to target. Bailey also said UK financial markets remain orderly despite political developments, reaffirmed the BoE’s focus on economic fundamentals, welcomed Kevin Warsh’s upcoming appointment as head of the U.S. Federal Reserve, and acknowledged early signs that AI adoption may be contributing to weaker hiring in some sectors.
ECB Holds Rates Steady, Signals Policy Stability Through 2026
The European Central Bank (ECB) kept its key interest rates unchanged on Thursday (Feb 5, 2026), in line with market expectations, and deliberately avoided signaling any future policy direction. This stance reinforced investor confidence that monetary policy will remain stable for some time, supported by resilient euro zone growth and inflation that is close to the 2% target. The ECB has held rates steady since ending a year-long easing cycle last June, as stronger-than-expected economic performance and easing price pressures have largely removed the need for additional stimulus. Inflation fell to 1.7% in January, driven by lower energy prices, but is still expected to return toward target over the medium term. ECB President Christine Lagarde is expected to reiterate that policy is in a “good place,” emphasizing the central bank’s data-dependent, meeting-by-meeting approach. While acknowledging uncertainty from global trade policies and geopolitical tensions, the ECB remains optimistic, citing low unemployment, solid wage growth, and strong domestic demand that has offset weak exports and industrial output. Market volatility and recent currency swings are unlikely to alter the outlook, with the ECB stressing that the exchange rate is not a policy target. With the euro now weaker on a trade-weighted basis than at the December meeting, economists broadly expect no rate changes throughout 2026, with the possibility of tightening only emerging in 2027 if domestic economic strength continues to dominate external risks.
U.S. Jobless Claims Jump on Weather Disruptions, Labor Market Still Stable
Initial U.S. jobless claims rose more than expected last week, increasing by 22,000 to 231,000 for the week ended January 31, above Reuters’ consensus of 212,000. The rise was largely attributed to severe snowstorms and freezing temperatures across much of the country, which likely caused temporary job losses. Seasonal volatility around the turn of the year also played a role, even as broader labor market conditions remain relatively steady. Economists continue to describe the labor market as “low hire, low fire,” with both hiring and layoffs subdued despite recent job cuts at large firms such as UPS and Amazon. Uncertainty linked to import tariffs and accelerating adoption of AI has made companies more cautious about workforce expansion. Continuing claims rose by 25,000 to 1.844 million, signaling slower hiring momentum, but overall stability is expected to keep the Federal Reserve on hold. With unemployment projected to remain at 4.4% and modest payroll growth ahead, the Fed is widely expected to maintain its policy rate at 3.50%–3.75% through at least the first half of the year.
U.S. Trade Deal Set for March 2026, Tariffs to Be Sharply Reduced
India and the United States are expected to sign a formal trade agreement in March 2026, following a joint statement to be released within days. Under the deal, the U.S. will cut tariffs on Indian exports to 18% from 50%, while India will lower import tariffs on selected U.S. products. The agreement follows Washington’s decision to ease tariffs in exchange for New Delhi halting Russian oil purchases, reducing trade barriers, and boosting imports from the U.S. India has committed to buying around US$500 billion worth of American goods over five years, including US$70–80 billion in Boeing aircraft, with total aviation-related orders potentially reaching US$100 billion when engines and parts are included. The deal also covers increased Indian imports of U.S. energy and semiconductors, reinforcing deeper strategic and economic ties. Indian equities rose on the news as the agreement reduced bilateral trade uncertainty, though opposition parties urged the government to disclose full details, particularly regarding potential impacts on agriculture. Officials from both countries said India would allow limited access for U.S. agricultural products while maintaining core protections for domestic farmers and markets.