The Fed cuts rates, the BoE waits, commodities point to a supercycle

The Federal Reserve kicks off its easing cycle, while the Bank of England stands pat; solid demand and supply constraints are strengthening the long-term outlook for commodities.

The forecasts of the more astute analysts — namely, that the Fed would take a more cautious decision than the mega cut dreamed of by Trump — have been fully borne out, and the Federal Reserve has lowered the benchmark rate by 25 basis points (to 4.00-4.25%, its first cut since December).

As of today, most officials expect at least two more cuts by the end of 2025 and five cuts in total by the first half of 2026; this should offset the American president’s stated disappointment at the "not bold enough" cut just made. The Federal Reserve, in particular, says it wants to support growth and employment, especially in the face of signs of weakening in the labor market, while remaining vigilant on inflation. But the growing political pressure for further rate cuts is making Jerome Powell’s position increasingly difficult. Will he really be able to decide meeting by meeting, as he says, or will he be forced to yield to outside pressure?

But while the Fed begins easing, many central banks remain on the sidelines: no cut from the ECB or the Bank of Japan. The Bank of Canada, by contrast, cut rates by 25 basis points, citing easing inflation and worries about the labor market. In the United Kingdom, the Bank of England kept its benchmark rate at 4% and slowed the pace of quantitative tightening, lowering its bond sales target from 100 billion to 70 billion pounds. With inflation still high at 3.8%, the UK economy is not yet considered "out of the woods." After the Fed cut, however, tech stocks led European markets higher, probably on the back of expectations of a similar rate reduction at the ECB’s next meeting.

As for commodities and precious metals, after the Fed's rate cut spot gold eased as the dollar strengthened, but it remains close to record highs (around $3,707/ounce this week). Several banks, including UBS, expect a rise to $3,800 by the end of 2025. By contrast, copper, rare earths and other strategic minerals could be entering a long-term upward phase. Strong demand from electric vehicles, renewables and AI/data infrastructure, together with geological constraints and underinvestment, reinforces the view that the potential of commodities is being underestimated.