Key events to watch in the week ahead: 19 – 25 May 2025

This week’s overview

US stock markets surged this week, lifted by cooler-than-expected consumer and producer inflation data, which reinforced expectations for at least two Federal Reserve (Fed) rate cuts this year. Risk sentiments were also supported by the temporary easing in US-China trade tensions, as markets priced in the possibility that the worst may be over and recession risks are receding—though a more definitive trade agreement may still be needed to sustain confidence over the coming months.

Heading into the new week, here are four key events to watch.

20 May 2025 (Tuesday, 12.30pm SGT): Reserve Bank of Australia (RBA) interest rate decision

At its April meeting, the RBA held the cash rate steady at 4.10%, following a 25 basis point (bp) cut in February—its first since November 2020. While it welcomed the continued decline in inflation, the Board stressed the need for further progress to ensure a sustainable return to target.

The April statement struck a more cautious tone than February, citing global uncertainties, including tariff risks. Governor Bullock noted the decision to hold was unanimous and did not rule out future easing, signalling a shift from earlier resistance to market rate-cut expectations.

With Q1 trimmed mean inflation back within the 2–3% target at 2.9% and global growth risks still elevated, we expect the RBA to cut rates by another 25 bp to 3.85% at its next meeting.

21 May 2025 (Wednesday, 2pm SGT): UK inflation rate

In March, the UK’s annual inflation rate slowed to 2.6% from 2.8% in February, falling below both market expectations and the Bank of England (BoE)'s 2.7% forecast. Core inflation also eased slightly to 3.4%, its lowest level since December, in line with consensus.

The softer inflation data paved the way for the BoE to cut its policy rate by 25bps to 4.25% at its early May meeting. The decision was narrowly passed in a 5–4 vote, with two members favouring a deeper cut to 4% and two preferring to hold at 4.5%.

Looking ahead, headline inflation is expected to temporarily rise to 3.5% in Q3 due to prior energy price increases. The rebound may begin as early as April, with initial projections pointing to a rise to 3.1%.

22 May 2025 (Thursday, 9.45pm SGT): US S&P Global Flash Purchasing Managers' Index (PMI)

For April 2025, the US economy showed signs of slowing, with the S&P Flash US Composite PMI falling to 50.6 from 53.5 in March. This pointed to the weakest private sector expansion since September 2023, as uncertainties surrounding US trade policy weighed on sentiment. While the final Manufacturing PMI held steady at 50.2, the Services PMI slipped to 50.8 from 54.4, marking the slowest growth in 17 months.

US tariffs have contributed to rising input costs, dampened export demand and eroded business confidence, with firms reported deteriorating sentiment and slower hiring amid the trade uncertainty. Looking ahead, with some rollback of tariffs, progress on trade deals, and a potential softening in US trade rhetoric, market participants will be watching closely for signs of improving economic conditions and easing recession risks.

23 May 2025 (Friday, 7.30am SGT): Japan’s inflation rate

Japan’s annual inflation rate eased slightly to 3.6% in March 2025 from 3.7% in the previous month, marking the lowest level since November 2024. Nonetheless, underlying price pressures remain firm: core consumer price index (CPI) rose 3.2% year-on-year (YoY), while core-core inflation—which excludes fresh food and energy—accelerated to 2.9%, up from 2.6% in February.

As a leading indicator of nationwide trends, Tokyo’s core CPI (excluding fresh food) surged to 3.4% year-on-year in April, a sharp rise from 2.4% in March. This suggests that underlying inflation remains sticky despite the Bank of Japan (BoJ)'s rate hikes. In line with the Tokyo print, nationwide core inflation is expected to rise to 3.4% year-on-year, up from 3.2% previously.

Persistent inflationary pressures could further complicate the BoJ’s policy path. The central bank has kept its short-term interest rate steady at 0.50% since January, with markets largely expecting a prolonged pause amid the drag from US tariffs and weakening export demand. A stronger inflation read may prompt markets to reassess the timing of the next hike, potentially bringing forward expectations for policy tightening into Q4 this year.