Fed holds rates for third consecutive meeting

The US Federal Reserve has kept its benchmark interest rate unchanged for a third consecutive meeting, leaving the federal funds target range at 3.50%–3.75% as policymakers grapple with a complex and uncertain macroeconomic backdrop. The labour market remained broadly resilient, with the unemployment rate edging down to 4.3% in March, while headline CPI accelerated to 3.3% from 2.4% in February — driven largely by higher energy prices — pushing inflation further above the Fed's 2% target.

Although economic data have held up, the Fed opted to maintain its wait-and-see stance, citing heightened uncertainty stemming from the US-Iran conflict, whose full economic implications have yet to fully materialise. As a result, the future policy path will depend on clearer signals from inflation and labour market data. Notably, the upcoming FOMC meeting will mark a significant leadership transition, with Kevin Warsh widely expected to succeed Jerome Powell as Fed Chair.

Global credit spreads tighten broadly in April

Overall, global bond credit spreads narrowed across the board in April, with both investment-grade and high-yield segments seeing a broad-based recovery -- U.S. and Asia-Pacific investment-grade spreads tightened by 11–13 basis points, while high-yield spreads compressed by 49–50 basis points.  Looking ahead, geopolitical tensions and trade frictions are expected to continue driving short-term volatility in credit spreads. However, over the medium to long term, solid corporate balance sheets, relatively low default rates, and robust investor demand are likely to provide strong support for credit spreads and bond prices.

Reserve Bank of Australia delivers third rate hike of 2026

On May 5, the RBA raised its policy rate by 25 basis points to 4.35%, marking the third increase in 2026. The move was primarily driven by persistently elevated inflation, with Australia’s CPI rising 4.6% year-on-year in March, further deviating from the RBA’s 2%–3% target range, largely due to higher prices in housing, transportation, and food and beverages.

While recent oil price shocks have added to inflationary pressures, their impact remains manageable compared with the peaks seen during the oil crises of the 1970s–1980s and the earlier surge during the Russia–Ukraine conflict. Meanwhile, Australia’s resilient economic fundamentals continue to support further monetary tightening. GDP grew by a stronger-than-expected 0.8% quarter-on-quarter in the first quarter, while the unemployment rate remained at a historically low level of 4.3%. This provides a policy buffer for further tightening and significantly reduces the risk of triggering a recession.