LONDON, June 19 (Reuters): 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 US Federal Reserve is warning not to put much weight on its policy projections.
The Swiss National Bank cut its benchmark rate to 0 per cent on Thursday, in response, it said, to falling inflation, a stronger Swiss franc and economic uncertainty caused by unpredictable US trade policy.
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.
The Bank of Canada held rates at 2.75 per cent in early June and said another cut might be necessary if the economy weakened in the face of tariffs.
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.
Sweden's central bank cut its key rate to 2 per cent from 2.25 per cent 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.
Markets expect the Reserve Bank of New Zealand to hold steady on July 9 after a 25 bps rate cut to 3.25 per cent 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.
