Big central bank rate cuts slow with tariffs and politics in headlights

Reuters

24-07-2025

LONDON, July 24 (Reuters) - The pace of central bank rate cuts is slowing as early movers near the end of their easing cycles while sticky inflation keeps others cautious.
Politics both domestic and international is another complication for central bankers, particularly in the United States, where President Donald Trump continues to muse publicly about firing Federal Reserve chair Jerome Powell.
Here's where 10 big central banks stand on the monetary policy path.
Bets that the Swiss National Bank will use negative interest rates to tackle the seemingly unstoppable rise of the safe haven franc have faded after it kept benchmark borrowing costs on hold at 0% in June.
Traders have since put 75% odds on another pause in September and speculate the SNB has started intervening to weaken the franc.
The Bank of Canada is widely expected to hold steady for now as U.S. tariff tensions contribute to a baffling economic outlook, with growth contracting as inflation rises and trade war disruptions to consumer behaviour muddle the outlook further.
Money markets expect that the formerly dovish central bank, which implemented 225 basis points (bps) of cuts in the nine months to April, will keep rates at 2.75% on July 30.
Sweden's central bank cut its key rate to 2% from 2.25% last month, and minutes from that meeting said policy could be eased again this year if growth disappoints and inflation remains tame.
The Riksbank has been one of the more aggressive central banks, with 200 bps of cuts since May 2024.
The Reserve Bank of New Zealand held rates steady earlier this month but said it expected to loosen monetary policy if price pressures continued to ease as forecast.
The RBNZ has cut rates by 225 bps already this cycle.
The European Central Bank left interest rates unchanged on Thursday after cutting eight times in a year, biding its time while Brussels and Washington negotiate over trade.
Its main policy rate is currently at 2% down from 4% a year ago, and inflation is back at the ECB's 2% goal.
Markets see around an 80% chance of a final 25 bp cut by year end but that depends on whether policymakers fear inflation might fall too far below target.
That in turn depends on a trade deal and whether the euro continues to appreciate.
The Fed meets next week, with markets all but certain it will remain on hold despite heavy pressure from Trump to make significant rate cuts.
Trump appeared close to trying to fire Powell last week, but backed off with a nod to the market disruption that would likely follow.
Further rate cuts are anticipated later this year and investors see roughly a 50% chance of a 25 bps reduction in September. A move then had been seen as likely until last week's data showed inflation rose to 2.7% year-on-year in June.
The Bank of England meets on Aug 7.
Markets expect a 25 bps rate cut even after data last week showed a surprise jump in inflation and a less-dramatic-than-feared cooling in the labour market.
Sticky inflation means the Bank of England has been more cautious than most with easing. Markets price two, 25 bps rate cuts by year-end -- including an August move.
The Reserve Bank of Australia is cautious too and surprised markets earlier this month by holding rates steady at 3.85%, saying it wanted to wait to confirm inflation will continue to slow.
It was a rare split decision, but Governor Michele Bullock said the disagreement was more about timing and, if inflation continues to slow, the bank remains on an easing path.
At least two more 25 bps cuts are priced by year end.
Norway's central bank cut rates by 25 bps to 4.25% last month, its first reduction since 2020.
The Norges Bank has been the most cautious among developed market central banks, and data this month showing core inflation at 3.1% reinforced this stance. Only one more cut this year is fully priced.
The Bank of Japan, the sole central bank in hiking mode, has had its task complicated by uncertainty around U.S. tariffs and Japanese politics. Prime Minister Shigeru Ishiba has denied media reports he decided to quit.
However, after Japan and the U.S. struck a trade deal this week, BOJ governor, Shinichi Uchida, signalled conditions for resuming hikes may start to fall into place.
Uchida said the deal had reduced uncertainty and increased the likelihood Japan will sustainably hit its 2% inflation goal - a requirement for further rate increases some policymakers say.