The Federal Reserve left its benchmark interest rate unchanged for the first time since July, at a range of 3.5% to 3.75%, as the US economy continued to expand ‘at a solid pace’. The Fed highlighted that the unemployment rate has shown signs of stabilising, giving rise to market expectations that it will keep US interest rates on hold for longer.
The central bank warned, however, there was still uncertainty over the economic outlook, and two of the 12-member Federal Open Market Committee voted in favour of another 25bp cut.
Elsewhere, the Eurozone economy grew by 0.3% in the fourth quarter of 2025, matching Q3’s rate, according to a preliminary estimate.
Around the world
The price of gold surpassed $5,500 per ounce last week – just days after crossing the $5,000 threshold – in the wake of geopolitical tensions and concerns over Japan’s fiscal position.
Japan’s Prime Minister Sanae Takaichi has proposed tax cuts which some investors worry could increase the country’s already high debt.
Meanwhile, trade tensions and a weaker US dollar have prompted investors to buy the yellow metal, often perceived as a ‘safe haven’ asset.
Higher commodity prices helped the UK’s FTSE 100 share index touch a fresh high last week, while the US S&P 500 index rose past 7,000 points for the first time on Wednesday after technology firm earnings updates pointed to continued strength.
Figure in focus: $100bn
Investment into global clean fuel will need to quadruple to at least $100bn annually by 2030 to meet global clean energy targets, according to a report by the World Economic Forum and Bain & Company.
The report said clean fuels – including biofuels and lower-carbon fossil fuels – can present significant opportunities for economic growth, social development and energy security, helping to reduce the share of fossil fuel imports for countries by 5% to 15%.
Separately, wind and solar produced more power than fossil fuels in the European Union for the first time last year, providing 30% of electricity, according to energy think tank Ember.
Graph of the week
According to the general consensus, investors appear to have quite a bullish outlook, and this is reflected in portfolio allocations. Geopolitical uncertainty has picked up again since the start of 2026, but investors appear convinced the global economy will be resilient in the face of unpredictable shocks and that monetary policy will do whatever is needed to buffer any short-term deterioration in financial conditions.
Even so, while central banks have cut interest rates over the past 12 months, yields on long-dated bonds have increased, notably in Japan, highlighting investor concerns over long-term government debt.
Words of wisdom – Physical AI
A type of artificial intelligence that can make decisions autonomously and perceive, reason and act in the real world through machines such as robots or consumer electronics.
January’s US Consumer Electronics Show, a leading technology trade event, featured examples of physical AI, from smart glasses to gaming consoles that incorporate users’ movements and humanoid robots that can sort and fold laundry.
The technology can learn from seeing people perform tasks and respond to changing circumstances, helping make the deployment of skilled robots more viable and potentially expanding the AI market to new devices and systems.
What’s coming up?
- On Monday, the Bank of Japan publishes its Summary of Opinions, including its expectations for inflation and growth.
- On Tuesday, the Reserve Bank of Australia meets to decide on interest rates.
- Wednesday sees final Purchasing Managers’ Indices released for markets including Japan, China, the Eurozone and US, as well as a flash estimate for Eurozone inflation.
- On Thursday, the Bank of England and the European Central Bank hold policy meetings to set interest rates.
- The US and Canada release jobs data on Friday.
