Developed market central banks are becoming increasingly cautious about cutting interest rates, reflecting growing uncertainty in global economics and politics. Only one of the five central banks that met this week – Switzerland’s Swiss National Bank (SNB) – cut rates, while others have signaled a pause or no further reductions.
The SNB reduced rates by 25 basis points to 0.25%, leaving borrowing costs near zero. However, markets see no further rate cuts from here, and policymakers have not ruled out returning to negative rates.
Canada’s Bank of Canada (BoC) cut its interest rate by 25 bps to 2.75%, its seventh consecutive reduction. Economists expect the BoC to continue easing policy due to inflationary pressures and weaker growth.
In contrast, Sweden’s Riksbank left rates at 2.25%, saying it expects to keep them steady for now due to inflation concerns. New Zealand’s Reserve Bank (RBNZ) cut its official cash rate by half a point to 3.75% last month, but market pricing suggests further cuts are unlikely.
The European Central Bank (ECB) lowered rates earlier this month to 2.5%, citing uncertainty and potential rising inflation due to trade wars and defence spending. The Federal Reserve kept rates steady in the US, maintaining projections for two more rate cuts this year.
Markets price a pause or no further reductions from the ECB in April, before rates fall again. The Bank of England (BoE) held interest rates steady at 4.5%, while the Reserve Bank of Australia (RBA) cut rates in February, citing a strong labour market but cautioning against further easing.
Overall, central banks are becoming more cautious as global economic uncertainty grows, leading to reduced expectations for rate cuts and increased uncertainty in monetary policy decisions.
Source: https://www.reuters.com/markets/rates-bonds/global-markets-central-banks-graphic-2025-03-20