The global economic landscape is undergoing a shift as central banks worldwide reconsider their monetary policies in response to U.S. President Donald Trump’s tariff measures. According to a report by Yadarisa Shabong and Alun John, these tariffs have created an environment where rate cuts are becoming more likely among developed-market central banks.

Read also: Impact of Tariffs on the US Dollar: A Decline in Value

In Switzerland, the Swiss National Bank is contemplating a rate cut to zero from the current 0.25%, despite its reluctance to return to negative rates. The Swiss franc’s strength, bolstered since Trump’s tariff announcement, poses a deflationary threat to the nation’s export-driven economy.

Meanwhile, the Bank of Canada has paused its rate adjustments at 2.75%, following a series of cuts, as it assesses the tariffs’ impact. Governor Tiff Macklem has highlighted the difficulty in making accurate economic forecasts under the current uncertainty.

In New Zealand, the Reserve Bank has already reduced its key rate by 25 basis points to 3.5%, reflecting its vulnerability to the China-U.S. trade tensions. The market anticipates further rate cuts despite recent inflation data exceeding expectations. Sweden’s Riksbank has maintained its rates at 2.25%, with little expectation of further cuts, while the European Central Bank has continued its easing trajectory, cutting rates for the seventh time in a year to 2.25%, with potential for more reductions.

The U.S. Federal Reserve finds itself in a challenging position, balancing the dual pressures of lower economic growth and rising inflation due to tariffs. While the Fed has held rates steady, market expectations suggest future cuts.

In the UK, the Bank of England is likely to implement a quarter-point rate cut in May, continuing its gradual easing approach as inflation concerns persist.

Australia, heavily reliant on trade with China, has seen increased expectations for rate cuts, potentially totaling 125 basis points this year, as tensions with the U.S. escalate. Norway’s central bank has postponed rate cuts despite inflationary pressures, but market sentiment suggests a reduction is imminent.

Japan remains an outlier, with the Bank of Japan in a rate-hiking mode, though tariffs may force a pause in its cautious cycle. The yen’s appreciation could also become a point of contention in trade discussions with the U.S.

Source: IndexBox Market Intelligence Platform