Headlines
Big central banks' forecasting lens gets fogged by US tariffs
Published by Global Banking & Finance Review®
Posted on June 5, 2025
4 min readLast updated: January 23, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on June 5, 2025
4 min readLast updated: January 23, 2026
Central banks worldwide are adjusting policies due to US tariffs, affecting interest rates, currency markets, and economic stability.
By Naomi Rovnick
LONDON (Reuters) -Unpredictable White House tariff rhetoric and its impact on currency markets, oil prices and the inflation outlook have put central banks across the world in a tight spot.
The European Central Bank cut interest rates on Thursday and looks set to pause, Switzerland appears to be moving back towards negative rates, Japan's resolve to drop ultra-easy monetary policy is wobbling, and baffling U.S. data could keep the Federal Reserve in wait-and-see mode.
Here's a look at where 10 developed-market central banks stand.
1/ SWITZERLAND
The Swiss National Bank next meets on June 19, and traders see a one in three chance that it will pull rates back into negative territory from 0.25% currently after consumer prices fell for the first time in four years.
The safe-haven Swiss franc has gained 10% against the dollar so far this year on geopolitical and market volatility. That's challenging Switzerland's export-heavy economy and cheapened imports, giving the SNB reasons to be wary about deflation.
2/ CANADA
The Bank of Canada held rates at 2.75% on Wednesday and said another cut might be necessary if the economy weakened in the face of tariffs.
The BoC has held rates for a second time in a row after an aggressive cutting cycle which shrunk rates by 225 basis points over nine months. Markets price in a roughly 85% chance of another quarter-point cut by September.
3/ NEW ZEALAND
Money 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.
4/ SWEDEN
Sweden's central bank left its key rate unchanged at 2.25% in May but with on-again-off-again U.S. tariffs now having contributed to an economic contraction in the first quarter, the Riksbank has signaled more easing ahead. Its next rate decision is on June 18.
5/ EURO ZONE
The ECB cut rates as expected on Thursday and kept all options on the table for its next meetings even as the case grows for a summer pause in its year-long easing cycle.
It has lowered rates eight times in the last year, and markets price in one more rate cut by year-end.
6/ UNITED STATES
The Fed, under consistent fire from President Donald Trump for resisting rate cuts, is expected to hold steady at its next June 18 meeting as tariff uncertainty makes wait-and-see its best option for now.
With businesses spooked by Trump's aggressive trade talk, layoffs have increased, manufacturing orders have slumped and factory gate prices have surged, indicating stagflation risks that could moderate if the White House softens its stance.
The Fed has held rates in the 4.25%-4.5% range since December, following 100 bps of cuts last year. Money markets price roughly 50 bps of further easing by year-end.
7/ BRITAIN
The Bank of England, which has lowered borrowing costs slowly to accommodate bumpy inflation trends, cut rates by 25 bps to 4.25% last month and revealed an unexpected three-way split among its policymakers that signaled uncertainty ahead.
Governor Andrew Bailey says the BoE was staying cautious amid unpredictable global trends. Traders expect no move in June and a 60% chance of a cut by August.
8/ AUSTRALIA
Weak growth data and fears of Aussie commodities producers and miners taking big blows from a U.S.-China trade war means the Reserve Bank of Australia stands ready to ride to the rescue with rapid rate cuts.
The RBA cut rates by 25 bps to 3.85% in May and traders see borrowing costs dropping to about 3% by year-end.
9/ NORWAY
Norway's central bank has ditched plans to ease monetary policy as its oil-linked currency weakens amid global trade uncertainty, posing a fresh inflationary threat.
The Norges Bank kept rates on hold at a 17-year high of 4.50% in May, and markets anticipate no change at the June 19 meeting.
10/ JAPAN
The Bank of Japan, long expected to pursue rate hikes, faces a challenging mix of economic trends if tariffs hurt exports but inflation keeps rising.
After the BoJ held borrowing costs steady at 0.5% in May, Governor Kazuo Ueda steadfastly refused to comment on the possible timing of the next increase.
(Reporting by Naomi Rovnick; additional reporting by Dhara Ranasinghe; Editing by Jan Harvey)
US tariffs have created uncertainty for central banks, affecting currency markets, oil prices, and inflation outlooks, making it difficult for them to set monetary policy.
The current interest rate set by the Swiss National Bank is 0.25%, with a possibility of moving back into negative territory.
The Bank of Canada has held rates at 2.75% and indicated that another cut might be necessary if the economy weakens due to tariffs.
The Federal Reserve is expected to hold rates steady at its next meeting, as tariff uncertainty leads to a cautious approach.
Japan's central bank is grappling with a mix of rising inflation and potential export declines due to tariffs, complicating its monetary policy decisions.
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