Global Rate Limbo Reigns After 150 Days of Trump
(Bloomberg) -- Multiple central banks are set to keep interest rates frozen in the coming week while continuing to gauge the impact of trade disruptions instigated by US President Donald Trump.
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From Washington to London, wary officials in countries that account for two fifths of the global economy may display a collective sense of paralysis as they assess risks to inflation and growth from tariffs and stop-start commerce flows. Renewed tensions in the Middle East will only add to their conundrum.
Their challenge was articulated on June 3 by the Paris-based OECD, which cut forecasts for global economic expansion while warning that protectionism is adding to consumer-price pressures. The toll that trade tensions are taking on world prosperity is likely to feature when Group of Seven leaders meet in Canada from Sunday.
Investors will focus most on the Federal Reserve decision on Wednesday, the eve of Trump's 150th day in power. Observers reckon officials there are still months away from being able to make a settled judgment on the implications of White House policy on the economy.
What Bloomberg Economics Says:
'Amid the uncertainty, the FOMC considers the optimal path is to stay put. We expect the median participant to signal just one 25-basis-point cut in 2025, down from two earlier this year — and a sizable minority may see no cuts at all. That's a big gap from market pricing, which still leans toward 50 bps. Powell will try to thread the needle, acknowledging softer data but stressing the Fed is in 'wait-and-see' mode amid policy uncertainty.'
—Anna Wong, Stuart Paul, Eliza Winger, Estelle Ou and Chris G. Collins, economists. For full analysis, click here
The Bank of Japan, meanwhile, may hold off on a rate move while adjusting bond purchases, and counterparts in the UK and Norway are seen following suit with unchanged borrowing costs.
In all, central banks responsible for six of the 10 most-traded currencies in the world are set for decisions. Among them, only those in Sweden and Switzerland are anticipated by economists to tweak rates, with small cuts predicted for each.
Peers in Brazil, Chile, Indonesia and Turkey may also deliver no change as policymakers digest domestic developments and international events.
Elsewhere, a flurry of Chinese economic data, UK inflation, and several speeches by European Central Bank officials might draw attention in one of the more packed weeks of the year so far.
Click here for what happened in the past week, and below is our wrap of what's coming up in the global economy.
US and Canada
US economic data in the holiday-shortened week include the latest readout of consumer demand. Economists project a decline in May retail sales, primarily due to fewer motor vehicle purchases. Excluding autos and gasoline, however, Tuesday's report is likely to show sales firmed after a soft start to the second quarter.
Concerns have been building that flagging consumer sentiment will translate into a sustained pullback in household demand.
Also on tap are reports on May housing starts and industrial production. The Fed's production report on Tuesday is seen showing a second month of declining manufacturing output, as factories contend with uncertainty stemming from trade policy.
Economists forecast figures on Wednesday will show little change in new residential construction, consistent with a sluggish housing market that's battling various headwinds, including high borrowing costs.
For more, read Bloomberg Economics' full Week Ahead for the US
In Canada, Prime Minister Mark Carney aims to meet with every world leader gathered in Kananaskis, Alberta, for the G-7 summit that starts in earnest on Monday. UK Prime Minister Keir Starmer said Saturday that Britain will seek to restart trade negotiations with Canada.
The Bank of Canada's summary of deliberations will offer new insight into how policymakers are thinking about the future rate path, after they held borrowing costs steady while telegraphing that a cut may be needed if the economy weakens and inflation is contained. Governor Tiff Macklem will also deliver a speech.
Population estimates for the first quarter will reveal how the government's efforts to crack down on temporary migration are shaping up, while retail data for April and a flash estimate for May will shed further light on consumers' response to the trade war.
Asia
It's a big week for central banks in Asia, with most seen holding rates unchanged during a period of uncertainty for trade policy and Middle East tensions. China and Japan will also release a range of economic data.
On Monday, Pakistan's central bank is expected to keep rates steady, followed by the BOJ on Tuesday. It's expected to hold after Governor Kazuo Ueda signaled inflation still isn't at target. Investors will focus on what policymakers do about their bond-purchase program, with about two-thirds of respondents in a Bloomberg survey anticipating a slowdown in cutbacks.
Bank Indonesia is seen keeping rates unchanged on Wednesday, as is Taiwan on Thursday as its economy endures currency volatility that sent the Taiwanese dollar to the strongest in three years. China is forecast to hold its 1- and 5-year loan prime rates steady on Friday.
The Philippines is the only central bank in the region seen cutting — by 25 basis points — as price pressures ease.
China on Monday releases a slew of figures on its economy, including home prices, retail sales, industrial production, foreign direct investment, and the jobless rate. Economists expect that retail sales slowed in May from the prior month, industrial activity held up as companies frontloaded manufacturing, and property investment contracted once again.
Japan starts releasing a number of important insights on Wednesday, including exports that likely contracted in May — the same for machine orders, as US tariff policy weighed on demand. National consumer prices likely strengthened in the month on a core basis in data due on Friday.
May trade figures are also due from India, while Singapore shows electronics exports and Malaysia and Taiwan their overall exports. The data will underscore what's been a tumultuous few months in global commerce as companies attempt to balance tariffs with anticipated customer demand.
Elsewhere, Australia likely added fewer people to payrolls in May. New Zealand reports first quarter gross domestic product, seen contracting from the prior year for the fourth quarter in a row, and Sri Lanka also reports GDP. We'll get a look at inflation trends in South Korea with the export prices index and producer prices, both for May.
For more, read Bloomberg Economics' full Week Ahead for Asia
Europe, Middle East, Africa
The BOE announces its rate decision at noon London time on Thursday, the day after UK inflation figures are released. A vote to hold policy at 4.25% is widely expected, despite signs that UK tax increases and US tariffs are weighing on growth and causing job cuts.
The concern is elevated headline inflation. Economists expect consumer-price growth to be essentially unchanged at 3.4% on Wednesday – well above the 2% target. Fresh Middle East turmoil after Israel struck Iran's nuclear program poses a fresh risk, with oil prices having spiked following the attack.
The Monetary Policy Committee is anticipated by forecasters to vote 7-2 to hold, with two likely dissenters seeking a quarter-point cut. Most expect the BOE to stick with guidance for reductions to be 'gradual and careful,' signaling a quarter-point move every three months. Bloomberg's survey sees three more such steps — in August, November and February — to 3.5%.
Several other decisions are scheduled:
Sweden's Riksbank was supposed to be done with cuts after reducing its rate by 175 basis points since May 2024. But slower growth and lower inflation readings, combined with Trump's trade jolt in April, mean easing is back on the table for the export-reliant Nordic nation. Of nine economists surveyed by Bloomberg, seven expect a cut on Wednesday, to 2%.
In Namibia the same day, officials will also likely reduce their rate at a time when inflation is at the lower end of their 3%-to-6% target band.
It's Norway's turn on Thursday. In a rare example of an advanced economy yet to begin post-pandemic easing, Norges Bank is widely expected to keep its rate at 4.5%. Its plan is to begin loosening from the highest level in more than 16 years in the second half. A key business survey backed that view last week.
The same day, the Swiss National Bank is widely expected to lower borrowing costs by a quarter point to dissuade haven flows into the franc. That would end almost three years of positive monetary policy, and bring the rate to zero — a level officials haven't touched before, despite their previous foray into negative territory.
Botswana may also cut borrowing costs on Thursday to help shore up the economy as inflation is expected to remain low.
Turkey's central bank is tipped to keep its rate at 46% the same day. Officials have used other means to loosen policy amid slowing inflation, such as lowering the average cost of funding from nearly 50% to closer to the benchmark rate.
A slew of euro-area central banker appearances include the Bundesbank chief on Monday, an event in Milan featuring as many as six Governing Council members on Wednesday, and an address by ECB President Christine Lagarde to a Ukrainian central bank conference on Thursday.
Among data highlights, Germany's ZEW investor sentiment survey is released on Tuesday, and euro-zone consumer confidence comes out on Friday.
In Israel on Sunday, data may show inflation eased slightly, to 3.5% in May from 3.6% a month earlier. The central bank has kept its rate at 4.5% for more than a year amid escalating regional tensions.
Inflation numbers are due in South Africa two days later, with a steady outcome of 2.8% expected. On Thursday, the South African Reserve Bank publishes its biannual financial stability review.
For more, read Bloomberg Economics' full Week Ahead for EMEA
Latin America
Brazil's April GDP-proxy data due Monday comes on the heels of robust first-quarter results.
Government handouts to low-income households and a strong labor market, among other tailwinds, are likely to head off any pronounced loss of economic momentum.
In Colombia, GDP-proxy data is on tap, along with trade balance and imports for April. The economy's strong start to 2025 obscured some weak data for March, which may be more indicative of what to expect for April.
Chile's central bank, led by Governor Rosanna Costa, on Tuesday will likely keep its key rate at 5% for a fourth straight meeting.
Local economists surveyed by Banco Central de Chile see a half-point of easing by year-end and a terminal rate to the cycle 50 basis-points lower, at 4%. The same survey has inflation back to the 3% target by year-end 2026.
Chile's central bank on Wednesday releases its quarterly inflation report, featuring updated growth and inflation forecasts in addition to revisions to the bank's monetary policy outlook.
Brazil's central bank may have gotten enough good news out of the May inflation report posted on June 10 to draw a line under its mini tightening cycle, and keep borrowing costs unchanged Wednesday.
That said, policymakers may not be in a hurry to trim the key rate — now at 14.75% — any time soon.
For more, read Bloomberg Economics' full Week Ahead for Latin America
--With assistance from Robert Jameson, Laura Dhillon Kane, Kati Pohjanpalo, Piotr Skolimowski, Ott Ummelas, Monique Vanek, Abeer Abu Omar, Philip Aldrick, Katia Dmitrieva, Brian Fowler and Vince Golle.
(Updates with UK-Canada trade talks in Canada section)
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