Global uncertainty places large central banks in tight spaces

Arun John and Naomi Rovnick

LONDON (Reuters) – The central bank is tackling rising uncertainty around economic growth and inflation, especially for those seeking to adjust their policies near the end of the rate-cutting cycle.

It makes life difficult for investors too. Norwegian central banks on Thursday shocked the market by cutting interest rates, warning that even the US Federal Reserve not to place too much weight on policy forecasts.

1/Switzerland

The Swiss National Bank said it cut its benchmark rate to 0% on Thursday, responding to economic uncertainty caused by lower inflation, stronger Swiss francs and unpredictable US trade policies.

The big question is whether the next time we’ll reduce the rate to negative territory. While SNB keeps all options on the table, Chairman Martin Schregel said there have been zero hurdles for further reductions.

2/Canada

The Bank of Canada held interest rates at 2.75% in early June, saying that if the economy weakens in the face of tariffs, another cut may be needed.

This pause was the second consecutive BOC after an aggressive cutting cycle that was reduced by 225 basis points over nine months. The market expects another 25 bps reduction by the end of the year.

3/Sweden

The Swedish central bank said it could be further easing before the end of the year as it cut its key rate from 2.25% on Wednesday to 2%, with weaker price pressures.

Riksbank has been one of the more aggressive central banks since May 2024 with a 200 bps cut.

4/New Zealand

The market expects the Reserve Bank of New Zealand to remain stable on July 9 after the 25bps rate was cut to 3.25% in May to protect the China-focused economy.

The RBNZ also warned that global trade uncertainty has made future movements unclear. In the market, another 25 bps cut has been reduced this year, and in addition to the 225 bps cut, it is already this cycle.

5/Eurozone

Earlier this month, the ECB was its eighth cut since mid-2024, keeping all options on the table for the next meeting.

ECB President Christine Lagarde says the Eurozone Central Bank’s 2% inflation target is within reach. The question for investors is whether inflation should bear its target and further ease.

Another market price with reduced fees by the end of the year.

6/USA

The Federal Reserve held interest rates steady on Wednesday, with Chairman Jerome Powell warning against putting too much weight on its forecast, but showed that borrowing costs are still likely to fall in 2025.

“No one has these… they have rate passes with great confidence, and everyone will agree that they all depend on data,” Powell said.