Central banks in developed markets are increasingly adopting a cautious stance toward interest rate cuts amid rising uncertainties in global economics and politics. In recent meetings of five key central banks, only Switzerland opted for a rate cut, while markets anticipate further easing in the United States and Britain and note Japan’s ongoing rate hikes. Starting with Switzerland, the Swiss National Bank reduced its interest rates by 25 basis points to 0.25%, marking its fifth consecutive cut since beginning from 1.75% a year ago.
Despite this dovish trend, the SNB has not dismissed the possibility of revisiting negative rates. In Canada, the Bank of Canada recently cut its key interest rate to 2.75%, which is its seventh cut in a row. Policymakers plan to proceed cautiously in the future, primarily due to inflation concerns, and market predictions suggest two additional rate cuts before year-end.
Sweden’s central bank maintained its rates at 2.25% and expressed intentions to keep them at this level for now. Although the Riksbank has previously cut rates to support a struggling economy, persistent inflation above the target has tempered the likelihood of further cuts. New Zealand’s Reserve Bank reduced its official cash rate to 3.75%, experiencing a total of 175 basis points of reductions over the past seven months.
Market expectations align with potential further cuts later this year. The European Central Bank has cut rates to 2.5%, while also indicating an awareness of inflation risks related to geopolitical tensions. The Fed in the United States kept rates steady but maintains projections for more cuts later in the year, as economic conditions appear uncertain.
Meanwhile, the Bank of England held interest rates at 4.5%, exhibiting caution amid persistent inflation. The Reserve Bank of Australia and Norway’s central bank both indicate that further easing may occur, albeit cautiously. Japan stands apart as the Bank of Japan remains in a rate hiking phase, cautiously observing global economic developments.