BOJ Holds Rates at 0.75% as Inflation Cools

Top U.S. envoys met with Israeli Prime Minister Benjamin Netanyahu on Saturday, urging his government to move forward with the second phase of the Gaza ceasefire agreement. The diplomatic push comes as the deal faces significant hurdles, including the return of a hostage's remains and the reopening of a critical border crossing.

Netanyahu met with U.S. President Donald Trump's envoy Steve Witkoff and son-in-law Jared Kushner. According to a U.S. official, the talks focused on recovering the last hostage's remains from Gaza and outlining the next steps for the territory's demilitarization. While the U.S. is keen to maintain momentum on the Trump-brokered deal, Netanyahu is under domestic pressure to delay progress until Hamas returns the hostage.

Palestinians receive donated food at a community kitchen in Nuseirat, central Gaza, illustrating the humanitarian crisis underlying the ceasefire negotiations.

Hostage Remains and Rafah Crossing Stall Progress

The most critical signal of the ceasefire's second phase would be the reopening of the Rafah border crossing between Gaza and Egypt. Ali Shaath, head of a planned technocratic government intended to manage Gaza's daily affairs, stated on Thursday that the crossing would open in both directions this week. However, Israel, which currently controls the Gaza side of the crossing, has not confirmed this and said it would review the issue.

The situation is complicated by the case of Ran Gvili, whose body remains in Gaza. His family is urging for increased pressure on Hamas. "President Trump himself stated this week in Davos that Hamas knows exactly where our son is being held," the family said Saturday, accusing the group of violating the agreement.

Hamas countered on Wednesday, claiming it had provided mediators with "all information" it possesses about Gvili's remains and accused Israel of obstructing search operations in areas it controls. The ceasefire originally took effect on October 10.

Regional Diplomacy Intensifies

Egypt's top diplomat is also pushing for an immediate reopening of the Rafah crossing. Foreign Minister Bader Abdelatty spoke by phone with Nickolay Mladenov, the Bulgarian diplomat serving as the high representative for Trump's new Board of Peace in Gaza.

According to a statement from the Egyptian Foreign Ministry, their discussion covered several key elements of the ceasefire's second phase:

• Deployment of an international monitoring force.

• Opening the Rafah crossing for entry and exit.

• Withdrawal of Israeli forces from the strip.

The ministry described the implementation of this phase as a "key entry point" for Gaza's reconstruction. Meanwhile, a Hamas delegation met with the head of Turkey's National Intelligence Organization in Istanbul to discuss the ceasefire.

U.S. President Donald Trump displays a signed charter at the Board of Peace meeting during the World Economic Forum in Davos.

Violence Persists on the Ground

Despite the diplomatic efforts, tensions remain high. On Saturday, an Israeli strike killed two Palestinian teenagers, cousins aged 13 and 15, in Gaza. According to Shifa Hospital in Gaza City, which received the bodies, the boys were searching for firewood at the time.

A relative, Arafat al-Zawara, said the teens were killed about 500 meters from the Yellow Line, which separates Israeli-controlled areas from the rest of the strip, in a zone the Israeli military had previously declared safe for Palestinians.

The Israeli military stated it had targeted militants who crossed the Yellow Line to plant explosives, denying that children were killed in the strike.

According to Gaza's Health Ministry, more than 480 Palestinians have been killed by Israeli fire since the ceasefire began. These casualty records are generally considered reliable by U.N. agencies and independent experts. Israel disputes the figures but has not provided its own data.

OPEC member Libya has signed a landmark 25-year oil development agreement with France's TotalEnergies and U.S.-based ConocoPhillips, launching a multi-billion dollar effort to revitalize its energy sector and boost crude production.

The deal was formalized at the Libya Energy and Economic Summit in Tripoli through the Waha Oil Company, a subsidiary of the state-owned National Oil Corporation. Under the terms, ConocoPhillips and TotalEnergies each hold a 20.4% stake in the Waha venture.

The Economics: A $20 Billion Bet on 850,000 Barrels

This long-term partnership involves investments exceeding $20 billion, which will be financed externally. The primary goal is to add 850,000 barrels per day (bpd) of additional oil capacity.

According to Libyan Prime Minister Abdul Hamid Dbeibah, the project is projected to generate approximately $376 billion in net revenues for the country. He emphasized that the deal will strengthen ties with key international energy partners, expand investment, and provide new economic resources, including job creation and wage increases.

US Backing Signals Renewed Confidence in Libya

The involvement of major U.S. corporations highlights a renewed international focus on Libya's energy potential. Massad Boulos, a senior adviser to the U.S. President for Arab World and Middle East Affairs, stated that deals signed by ConocoPhillips and Chevron prove that "the United States and its world-class companies are betting on Libya's future."

Boulos added, "By opening new opportunities for competitive international investment, Libya is signalling it's ready to play in the big league again."

In a separate move, the Libyan government also signed an initial cooperation agreement with Chevron and Egypt's Ministry of Petroleum.

Opening the Floodgates: New Licensing Round Beckons Majors

Beyond the Waha deal, Libya is actively preparing to award new exploration and development licenses to international firms. Masoud Suleman, acting chairman of the National Oil Corporation, announced that the results of the country's first oil exploration bidding round in over 17 years will be released on February 11.

The licensing round covers 22 areas—11 offshore and 11 onshore. Several global energy giants have qualified to participate, including:

• BP

• Chevron

• ExxonMobil

• TotalEnergies

• Eni

• Shell

• OMV

A Strategic Play for European Energy Security

Libya produces some of North Africa's most cost-effective, low-sulfur crude oil. Much of this potential has been sidelined since the 2011 civil war. As Europe seeks to diversify its energy sources away from Russia, Libyan crude has become increasingly important due to its quality, proximity, and an existing pipeline connecting western Libya to Italy.

Ryan Lance, chief executive of ConocoPhillips, noted that Libya recently hit a production milestone of 1.4 million bpd. "The country is well-positioned to deliver oil and gas to Europe and around the world, helping ensure European energy security, as well as global energy security," he said.

Ambitious Goals Meet Lingering Security Risks

The ultimate goal is ambitious. Patrick Pouyanne, CEO of TotalEnergies, described Libya's target of reaching 2 million bpd by the end of the decade as a "strong and pragmatic and realistic ambition."

However, significant challenges remain. The country operates under two rival governments: a UN-backed administration in Tripoli and an eastern-based government supported by military commander Field Marshal Khalifa Haftar. This political division creates persistent security risks, and rival factions have previously forced the shutdown of oilfields and terminals. In 2023, for instance, unrest led to a temporary declaration of force majeure at Sharara, Libya's largest oilfield.

A recent survey of economic experts suggests South Korea's economy is set for another year of sluggish performance, with more than half predicting growth will remain in the 1% range.

The poll, conducted by Southernpost Inc. for the Korea Enterprises Federation (KEF), surveyed 100 economics professors to gauge their outlook on Asia's fourth-largest economy.

Subdued Growth Forecasts Dominate Expert Outlook

The consensus among the surveyed economists points to a challenging year ahead. The average growth forecast for the Korean economy stands at 1.8%, a figure slightly more pessimistic than the government's 2% outlook and the International Monetary Fund's (IMF) 1.9% projection.

Key findings from the survey include:

• 54% of experts believe Korea's economy will post growth in the 1% range this year.

• 36% anticipate a return to 2% growth, but not until 2027, driven by a slow recovery in demand and consumption.

• 6% forecast that economic growth could fall below 1%.

This follows a year in which the economy expanded by just 1%, a notable slowdown from the 2% growth recorded in the previous year.

Currency Volatility and US Tariff Risks Loom

Beyond headline growth figures, the experts identified specific risks clouding the economic horizon. They projected the won-dollar exchange rate to fluctuate between 1,403 won and 1,516 won this year, indicating potential for currency volatility.

Furthermore, trade relations with the United States are a significant source of concern. Nearly 60% of the respondents said the outcome of U.S.-Korea tariff negotiations would negatively impact both Korean exports to the U.S. and domestic corporate investment.

AI Offers a Productivity Boost Amid Tech Security Concerns

On the domestic front, technology presents both opportunities and challenges. An overwhelming 92% of the economists surveyed believe the expanding use of artificial intelligence (AI) will help address labor shortages and boost productivity, particularly within the manufacturing sector.

However, this optimism is tempered by security concerns. Nearly 90% of the experts urged the government to implement effective measures to prevent the overseas leakage of critical technologies like semiconductors, calling for strict penalties for any violations.

Japanese Prime Minister Sanae Takaichi has issued a direct warning that the government is prepared to act against speculative market moves, following a sharp rebound in the yen that has put traders on high alert for currency intervention.

The statement comes as both the Japanese yen and government bonds face selling pressure. Markets are reacting to concerns that Takaichi's expansionary fiscal policies, combined with the Bank of Japan's slow pace of interest rate hikes, could lead to increased government debt and runaway inflation.

Sudden Yen Rebound Fuels Intervention Speculation

The yen's recent slide brought it close to the psychologically significant level of 160 per U.S. dollar. However, the currency experienced a sudden jump on Friday after the New York Federal Reserve was reported to be conducting rate checks.

Some traders interpreted this move as a potential signal of coordinated U.S.-Japan intervention aimed at halting the yen's decline, immediately increasing volatility in the currency markets.

Policy Pressures Weigh on Japanese Markets

When asked about the recent sell-off in bonds and the yen's weakness during an appearance on Fuji Television, Takaichi declined to comment on specific market fluctuations.

"The government will take necessary steps against speculative or very abnormal market moves," she stated, without providing further details on what those steps might entail.

The market jitters stem from Takaichi's economic agenda, which includes a substantial spending package to offset rising living costs. A plan to suspend an 8% levy on food sales for two years has also triggered a spike in bond yields, raising the cost of financing Japan’s massive public debt.

The Domestic Pain of a Depreciating Currency

For Japanese policymakers, a persistently weak yen has become a major economic challenge. It directly increases the cost of imports, which in turn fuels broader inflation and diminishes the purchasing power of households across the country.

Despite campaign promises to slash energy bills, American consumers saw their costs rise in 2025. President Trump’s energy policy, enacted early in his second term, appears to have reversed previous trends, with higher prices expected to continue into 2026 and beyond.

Household Energy Bills Spike Across the Nation

An analysis of data from the Energy Information Administration (EIA) reveals the average U.S. household electricity bill was 6.7 percent higher in 2025 than in 2024. This translates to an additional $116 in spending per household for the year.

Some regions faced even steeper increases. Washington D.C. saw electricity costs jump by 23 percent, while Indiana experienced a 17 percent rise.

The financial pressure extends beyond electricity. Natural gas costs also climbed by an average of 5.2 percent last year. This has led to a sharp increase in utility disconnections for unpaid bills, with New York State, for example, recording a fivefold rise in its disconnection rate as households are forced to choose between essentials.

A Policy Pivot to Fossil Fuels

Upon taking office, President Trump declared a state of energy emergency and issued executive orders designed to curb former-President Biden's 2022 Inflation Reduction Act. These measures prioritized the expansion of fossil fuels while limiting the deployment of renewable energy.

This policy shift halted several wind energy projects and created investor uncertainty in the clean energy sector, stalling new development. Concurrently, the administration has moved to expand oil and gas operations and extend the operational life of several aging coal plants.

Expert Warnings and White House Rebuttals

The impact on consumers has drawn sharp criticism. "Instead of reducing electric bills by 50 percent, the president's actions have raised the cost of home energy for all Americans," stated Mark Wolfe, executive director of the National Energy Assistance Directors Association.

Wolfe added that the financial strain is expanding beyond the lowest earners. "It used to be the poorest Americans who struggled with their power bills, but now we are seeing more and more middle-income families who have to make sacrifices to avoid being shut off."

President Trump has pushed back on these concerns, recently calling the affordability crisis a "hoax" and a "fake narrative" created by political opponents. He also described 2025 as the "greatest first year in history" for the economy.

AI Data Centers Compound the Energy Squeeze

The administration's focus on fossil fuels has come at a direct cost to new energy capacity. A December report from Climate Power estimated that canceled or delayed renewable projects represent a loss of almost 25 GW of planned generation—enough to power nearly 13.2 million homes.

At the same time, U.S. energy demand has started increasing for the first time in decades, driven largely by the administration's support for large-scale data centers needed for artificial intelligence (AI).

Facing rising consumer bills and concerns about a potential energy supply gap, the White House has called for an emergency wholesale electricity auction. The goal is to compel tech companies to pay for the new power capacity their data centers require.

A Challenging Outlook for US Energy Supply

While the administration has also shown support for nuclear power with significant investments, these projects take years to develop and are unlikely to resolve the immediate supply shortage.

Slowing the development of new renewable energy capacity while demand from the tech sector grows is expected to keep upward pressure on consumer bills. While tech firms may be willing to pay a premium for power, securing affordable energy for households will remain a significant challenge for the foreseeable future.

The Federal Reserve is expected to keep interest rates unchanged this week, a move likely to be mirrored by central banks in Canada, Brazil, and Sweden as global policymakers navigate a tense economic landscape.

Officials in Washington are set to conclude their two-day meeting on Wednesday, where they are widely anticipated to resist President Donald Trump's demands for lower borrowing costs. This decision comes as Fed Chair Jerome Powell receives public backing from his international peers. Central bank chiefs from the UK, Europe, and over a dozen other nations have expressed "full solidarity" with Powell, reinforcing central bank independence against mounting political pressure from the White House.

The Fed is not just contending with verbal attacks. The institution is also facing grand jury subpoenas and a Supreme Court case concerning President Trump's authority to fire Governor Lisa Cook. This domestic drama unfolds against a backdrop of global uncertainty, marked by market volatility in Japan and ongoing trade tensions.

"We are in a more shock-prone world," International Monetary Fund head Kristalina Georgieva remarked at the World Economic Forum in Davos. "We're not in Kansas any more." While policymakers are focused on growth risks from tariffs, they remain vigilant about potential inflation pressures. With 18 central banks scheduled for decisions this week, the global policy landscape is varied; some African nations, for instance, may be poised to ease rates.

Federal Reserve Braces for a Pause

After implementing three consecutive rate cuts at the end of 2025, Federal Reserve officials are expected to hold rates steady. Chair Powell will likely signal that current policy is well-positioned, buying the committee time to assess the impact of its previous easing measures without committing to a future direction.

Recent economic data supports a pause. A decline in the U.S. unemployment rate in December, combined with inflation holding above the Fed's target, provides common ground for both hawks and doves on the committee.

Powell's upcoming press conference will be his first since the disclosure of Justice Department subpoenas targeting the Fed and the Supreme Court hearing on Governor Cook's employment. However, he is not expected to comment extensively on these legal matters. Key economic data this week includes the December producer price index, durable goods orders, the November trade deficit, and January consumer confidence.

Global Central Banks Stand Firm

Bank of Canada Expected to Stay on Sidelines

The Bank of Canada is widely projected to maintain its policy rate at 2.25% on Wednesday. The accompanying monetary policy report is likely to highlight slower growth and heightened uncertainty related to the upcoming review of the US-Mexico-Canada Agreement (USMCA). Traders see the bank holding rates for most of 2026, aligning with policymakers' view that the current rate is appropriate. Upcoming Canadian data includes November GDP figures, which are expected to show weak fourth-quarter output.

Inflation Data Guides Australia and Japan

Australia: All eyes are on inflation data due Wednesday, ahead of the Reserve Bank of Australia's (RBA) February 3rd decision. Economists forecast that consumer price gains accelerated to 3.6% year-over-year in the fourth quarter. Paired with recent strong jobs data, a high inflation reading could reinforce the RBA's hawkish stance and fuel speculation of a rate hike next month.

Japan: Tokyo's inflation report on Friday, a key indicator for national trends, is expected to show core inflation slowing to 2.2%. However, an index that excludes energy subsidies is projected to hold steady at 2.6%, suggesting underlying price pressure remains robust. This could keep the Bank of Japan on a path toward further rate increases.

Key Economic Indicators Across Asia

China is set to release industrial profits data on Tuesday, which will provide fresh insight into the pressures facing its manufacturing sector from weak domestic and export demand. Elsewhere in the region, fourth-quarter GDP data is scheduled for the Philippines, Taiwan, and Hong Kong. Growth in the Philippines is forecast to have accelerated to 1.5% quarter-on-quarter, while Taiwan's year-on-year growth is seen rising to 8.75%.

Several economies, including the Philippines, Hong Kong, and Thailand, will release December trade data. Consumer confidence reports are also due from Japan and New Zealand, where business sentiment in December hit a 30-year high. On the policy front, Pakistan's central bank is expected to cut its SBP rate to 10%, while Sri Lanka is likely to hold its rates steady.

Eurozone Focuses on Growth and Prices

Economic momentum will be the main theme in the euro area this week. Germany's Ifo business sentiment survey on Monday will be closely watched to see if it aligns with recent positive industrial data.

The first look at fourth-quarter GDP for the region arrives on Friday, with economists unanimously predicting an expansion. Stronger-than-expected data from Germany has already set a positive tone, and output is also expected to have increased in France, Italy, and Spain.

Preliminary inflation figures from Spain and Germany are also due Friday. Inflation is anticipated to have slowed to a seven-month low of 2.4% in Spain, while holding at 2.0% in Germany. Both the European Central Bank and the Bank of England are now in their pre-meeting blackout periods ahead of their decisions on February 5.

Divergent Paths in Emerging Markets

Latin America's Mixed Policy Outlook

Brazil: The central bank will hold its first policy meeting of 2026 as mid-month inflation data is released. Inflation may have risen above the 4.5% upper limit of the target range. While most analysts expect Brazil to begin an easing cycle in the first quarter, trimming the key rate from its current 15%, a cut this Wednesday is seen as unlikely.

Colombia: The central bank is expected to act decisively on Friday in response to a 23% hike in the minimum wage. Analysts forecast a half-point rate increase to 9.75%, with more tightening expected by year-end as 2026 inflation expectations have jumped significantly.

Mexico & Chile: Mexico's fourth-quarter output data will likely show the economy avoided a technical recession, though uncertainty around U.S. trade policy clouds the 2026 outlook. Chile's central bank is expected to stand pat after cutting its rate to 4.5% in December. Major Latin American economies including Brazil, Chile, Colombia, and Mexico will also release December unemployment reports.