Developed market central banks are becoming more cautious amidst global economic and political uncertainties, following a series of interest rate reductions. Out of the five central banks that recently convened, only Switzerland opted to reduce rates. Traders anticipate further easing measures in the United States and Britain, while Japan continues to maintain its hiking stance.
Switzerland's National Bank, for instance, decreased interest rates by 25 basis points to 0.25%, marking its fifth consecutive rate cut from 1.75% a year ago. Despite market expectations for no additional cuts, authorities haven't ruled out the possibility of returning to negative rates.
In Canada, the Bank of Canada trimmed its key interest rate by 25 basis points to 2.75% in its seventh consecutive cut. Concerns regarding inflation and weaker growth dynamics prompt the bank to proceed cautiously with future adjustments, given the looming threat of a recession induced by tariffs.
Sweden decided to keep rates at 2.25%, affirming its intention to maintain this level for the time being. With inflation still exceeding the 2% target, the likelihood of further rate reductions is deemed minimal, in line with market sentiment.
New Zealand's Reserve Bank executed a half-point rate slash to 3.75% last month, part of a series of cuts totaling 175 basis points over seven months. The departure of RBNZ Governor Adrian Orr, who hinted at additional rate cuts in April and May, aligns with market expectations of rates entering a neutral range.
The European Central Bank recently reduced rates to 2.5% - the sixth cut since June. Despite concerns over potential inflation spikes due to trade conflicts and increased defense spending, policymakers hinted at a possible pause in easing measures come April before resuming rate declines.
The Federal Reserve in the United States upheld rates this week and announced projections for two more cuts in 2019. Chair Jerome Powell pointed to President Donald Trump's policies, particularly import tariffs, as factors contributing to slower economic growth and temporary inflation hikes, mentioning the "unusually elevated" degree of uncertainty.