Central banks are grappling with elevated uncertainty about economic growth and inflation, complicating decision-making, especially for those trying to calibrate policy as they near the end of their rate-cutting cycles.
That's making life hard for investors too. Norway's central bank on Thursday gave markets a shock by cutting interest rates, and even the U.S. Federal Reserve is warning not to put much weight on its policy projections.
1/ SWITZERLAND
The big question is whether it will cut rates into negative territory next time. The SNB is keeping all options on the table, but chairman Martin Schlegel says the hurdle to further cuts is higher now rates are at zero.
2/ CANADA
That pause was the second in succession for the BoC, after an aggressive cutting cycle which shrank rates by 225 basis points over nine months. Markets anticipate one further 25 bps cut by year-end.
3/ SWEDEN
Sweden's central bank cut its key rate to 2% from 2.25% on Wednesday and said that, with price pressures weak, it may ease further before year-end to boost sluggish growth.
The Riksbank has been one of the more aggressive central banks, with 200 bps of cuts since May 2024.
4/ NEW ZEALAND
Markets expect the Reserve Bank of New Zealand to hold steady on July 9 after a 25 bps rate cut to 3.25% in May to protect the China-focused economy.
The RBNZ also warned that global trade uncertainties made future moves unclear. Markets see one more 25 bps cut this year, on top of the 225 bps of cuts already this cycle.
5/ EURO ZONE
The ECB cut rates earlier this month, its eighth cut since mid-2024, and kept all options on the table for its next meetings.
ECB President Christine Lagarde says the euro zone central bank's 2% inflation target is in reach. The question for investors is whether inflation will undershoot that target, and necessitate further easing.
Markets price in one more rate cut by year-end.
6/ UNITED STATES
"No one holds these ... rate paths with a great deal of conviction, and everyone would agree that they're all going to be data-dependent," Powell said.
He added that if not for tariffs, rate cuts might be in order given recent inflation readings have been low.
Markets still see roughly two 25 bps cuts by year-end.
7/ BRITAIN
The sometimes surprising Bank of England met market expectations on Thursday, keeping interest rates at 4.25%.
The BoE has been cutting roughly once a quarter for the past year, and markets expect it to continue at that pace, with two more cuts priced in by year end.
Three of the nine rate-setters voted on Thursday for a cut however. Some investors speculate softening labour data could cause the BoE to up the pace of cuts, though others reckon it will be held back by high UK inflation.
8/ AUSTRALIA
Weak growth data and fears commodities producers and miners will take a blow from a U.S.-China trade war means the Reserve Bank of Australia stands ready to deliver rapid rate cuts.
The RBA cut rates by 25 bps to 3.85% in May and traders see borrowing costs dropping to near 3% by year-end.
9/ NORWAY
The Norges Bank has been the most cautious among developed market central banks on rate cuts, and governor Ida Bache said only one or two more reductions were planned this year.
10/ JAPAN
Escalating Middle East tensions and U.S. tariffs complicate the BOJ's task of raising still-low interest rates and reducing a balance sheet that has ballooned to roughly the size of Japan's economy.
On Tuesday it decided to decelerate the pace of its balance sheet drawdown next year, signalling its preference to move cautiously in removing remnants of its decade-long stimulus.
