Fidelity International's Head of Global Macro and Strategy Asset Allocation Department, Salman Ahmed, predicts that the European Central Bank will maintain its current pace of interest rate cuts until rates reach a neutral level of around 2%, after which it will gradually reduce rates at individual meetings. Ahmed's views are more moderate compared to current market prices, forecasting that growth pressures will eventually lower rates to 1.5% by the end of the year or earlier, mainly due to ongoing concerns about global trade tensions. Expectations are that tariffs will make progress in the coming weeks, and tariffs are a key factor influencing the ECB's future policies. At the first interest rate meeting in 2025, the European Central Bank continues to cut rates to support struggling economies, while the Federal Reserve remains unchanged. The future policies of the two central banks are uncertain, depending on President Trump's exact policies on trade tariffs and their impact on inflation and economic growth, especially in Europe. As widely expected, the Federal Reserve kept its policy rates unchanged at 4.25% to 4.50%, marking the first time it has stayed put since starting to cut rates last year, due to the increasingly complex economic environment. The Fed's post-meeting statement showed significant changes, with the assessment of the labor market shifting from "generally slowing down" to "stabilizing," reflecting strong job data from December. Although the statement no longer mentioned sustained progress in inflation, but rather stated that inflation is "maintained at a high level," Chairman Powell downplayed the changes in the statement, saying it was just a "wording adjustment." Fidelity International states that the key signal from the press conference is that future inflation trends will be cautious, especially as Powell steadfastly avoids all tariff-related issues. Although he emphasized that the Fed is no longer "eager" to cut rates, Powell himself is more inclined to do so. For example, he reiterated that current policy remains "quite restrictive" and indicated that if either data from the labor market or inflation shows a need, he would lean towards cutting rates. Therefore, faced with a seemingly tough statement from the Federal Reserve's board and Powell's inclination to cut rates, the market has become uncertain. Fidelity International believes that once the Fed starts incorporating the new government's actual policies into its expectations, this contradiction will eventually be resolved. Fidelity International predicts that a combination of tariffs and reduced immigration policies will keep inflation high. The labor market is stabilizing rather than weakening, and it is more likely that the Fed will continue its current policies in 2025 to prioritize policy stability over early policy adjustments. Fidelity International notes that the European Central Bank's move to lower its main policy rate by 0.25% to 2.75% is in line with expectations, and the related statement remains largely unchanged, emphasizing assessment based on data and evaluation at each meeting. The European Central Bank still views the current rates as restrictive and indicates further rate cuts until rates reach neutral. Market participants' assessments are largely in line with the European Central Bank, agreeing on a neutral rate of around 2%. However, considering the bleak growth prospects, there is an increased possibility of rate cuts to a looser range. Although no new economic forecasts were released at the meeting, recent data supports the above views, including GDP growth in the fourth quarter staying at 0.0%, lower than the European Central Bank's previous forecast of 0.2%, indicating heightened downside risks to the economy. In terms of inflation, both overall and core inflation indices in the fourth quarter were below expectations, but ECB President Lagarde pointed out that high wages and escalating global trade tensions causing supply chains to tighten could create inflation pressures. Recently, rising energy prices and currency devaluation have also brought additional inflation risks. However, Lagarde emphasizes that the deflation trend "persists." The latest bank lending survey shows further tightening of credit conditions, mainly due to uncertainties in trade policy, as banks see increased risks and lending growth continues to slow down, highlighting the need for further loosening of monetary policy.