US and China Reach Trade Framework; World Bank Lowers Global Growth Forecast
Key Takeaways
- US and China established trade framework in London, aiming to ease export restrictions.
- World Bank lowers 2025 global growth forecast to 2.3%; India's growth remains strong.
- ECB reduced interest rate, its eighth cut since June 2024; forecasts slower wage growth.
- Bank of Mexico expected to cut key interest rate by 50 basis points on June 26.
- Central Bank of Kenya reduced benchmark lending rate by 25 basis points to 9.75%.
Top Stories
US and China reach trade framework in London, easing export curbs.
On June 9-11, 2025, the US and China established a framework in London to address trade tensions, aiming to ease export restrictions on rare earth minerals and high-tech products. The discussions, led by officials including Howard Lutnick and He Lifeng, focused on reducing trade deficits and implementing the Geneva Consensus, with markets reacting to the news.
World Bank lowers global growth forecast to 2.3% for 2025, India's growth remains strong.
In June 2025, the World Bank reduced its global growth forecast to 2.3% due to trade tensions and global economic uncertainty, while India's GDP growth for FY26 is projected at 6.3%. Jamie Dimon also warned of potential US economic deterioration due to trade disruptions.
ECB reduces interest rate, forecasts slower wage growth.
On June 11, 2025, the ECB reduced its interest rate, marking the eighth cut since June 2024, after the annual inflation rate fell to 1.9% in May. The ECB forecasts slower wage growth in the Eurozone, with an increase of 3.1% in 2025.
Bank of Mexico expected to cut interest rate.
The Bank of Mexico is expected to cut its key interest rate by 50 basis points on June 26, despite inflation exceeding the 3% target, reaching 4.42% in May. Economists surveyed by Reuters anticipate a fourth consecutive rate cut of 50 basis points, bringing interest rates down to 8%.
Central Bank of Kenya reduces benchmark lending rate.
On June 10-11, 2025, the Central Bank of Kenya (CBK) reduced its benchmark lending rate by 25 basis points to 9.75 percent to stimulate credit uptake and support economic activity. The CBK revised its 2025 economic growth forecast down to 5.2% from 5.4%.
Central Bank Actions
US Federal Reserve expected to hold rates steady until September 2025.
A Reuters poll indicates the US Federal Reserve is expected to hold interest rates steady until at least September 2025, with most economists anticipating rate cuts to begin in the next quarter. Analysts predict the ECB will lower its deposit interest rates by 25 basis points to 1.75% in September.
Bank of Japan expected to postpone interest rate hike until early 2026.
A Reuters poll suggests the Bank of Japan (BOJ) will postpone its next interest rate hike until early 2026, due to uncertainty over U.S. tariff policies. The BOJ exited its stimulus program in March 2024, raising short-term interest rates to 0.50% in January 2025.
Geopolitical Impact
Fitch downgrades outlook on global sovereigns.
On June 10, 2025, Fitch downgraded its outlook on global sovereigns to 'deteriorating', citing increased trade tariffs and political uncertainties. North American inflation is expected to reach 4.3% in 2025.
ASML faces challenges from geopolitical tensions and trade disputes.
ASML, a Dutch company, faces challenges from geopolitical tensions and trade disputes, particularly from US tech restrictions against China. The company is lobbying to protect its global supply chain and counter export bans.
Global Trade
ECB President Lagarde criticizes coercive trade policies.
During her visit to Beijing in June 2025, ECB President Christine Lagarde criticized coercive trade policies, stating they are unsustainable and damage the global economy. She urged nations to respect global trade rules and called for cooperative solutions to protect international trade.
Bloomberg discusses trade, tariffs, and debt concerns.
On June 11, 2025, Bloomberg's "The Opening Trade" discussed key themes for analysts and investors, including the average effective tariff rate for the US and China. The discussion also touched on fiscal and debt concerns.
EU anticipates trade negotiations with US will extend beyond July 9 deadline.
The EU anticipates trade negotiations with the US will extend beyond Trump's July 9 deadline, with the US set to impose 50% tariffs on almost all EU exports after this date. The EU is preparing retaliatory measures, including actions beyond tariffs.
Corporates adopt cautious approach to trade.
On June 10, 2025, Marissa Adams from HSBC discussed the global trade outlook, noting that corporates are adopting a cautious approach. Over 70% of companies are pausing or reconsidering long-term investments, according to a recent HSBC Trade Pulse survey.
China and African countries urge resolution of trade disputes.
China, along with 53 African countries and the African Union Commission, urged the US and the international community to resolve trade disputes through consultations. They denounced the use of tariffs and called for increased development aid for Africa.
Market Overview
JPMorgan revises forecast for China’s onshore yuan.
On June 10-11, 2025, JPMorgan revised its forecast for China’s onshore yuan, expecting it to reach 7.15 yuan per dollar by year-end due to reduced U.S.-China trade war risks. The dollar remained stable against the yuan at 7.1875 during European trading hours.