Central banks turn more cautious on rate cuts

Central bank easing meets global caution

BoE keeps rates steady, SNB cuts on Thursday

BOJ remains the G10 outlier

By Yadarisa Shabong and Alun John

March 20 (Reuters) – Big developed market central banks are turning cautious after a series of interest rate cuts and as uncertainty in global economics and politics grows.

Of five central banks that met this week, only Switzerland’s cut rates, though traders see further easing in the United States and Britain, while Japan remains in hiking mode.

Here’s a look at where 10 big central banks currently stand:

The Swiss National Bank cut interest rates by 25 basis points (bps) to 0.25% on Thursday, leaving borrowing costs just above zero.

This was the fifth successive cut since the SNB started lowering rates from 1.75% a year ago.

Markets see no further reductions from here, notable because the SNB has been the most dovish developed market central bank. Still, policymakers have not ruled out a return to negative rates.

The Bank of Canada cut its key interest rate by 25 bps to 2.75% last week, its seventh consecutive reduction.

It plans to “proceed carefully with any further changes” given concerns about inflationary pressures and weaker growth.

Economists say the risk of a tariff-induced recession will keep the BoC in easing mode. Markets price almost two more 25 bps rate cuts by year-end.

Sweden’s central bank left rates at 2.25% on Thursday, and said it expects to keep them at this level for now.

The Riksbank has been firmly in the dovish camp, easing its key rate from 4% to support a sluggish economy. But with inflation still above its 2% target, markets agree with policymakers that further cuts are unlikely.

The Reserve Bank of New Zealand slashed the official cash rate by half a point to 3.75% last month, having cut rates by a total of 175 bps in seven months.

RBNZ Governor Adrian Orr, who has since resigned, had suggested further cuts of 25 bps in April and May which would leave rates in a neutral range. Market pricing is broadly aligned with that.

The European Central Bank lowered rates earlier this month to 2.5%, its sixth cut since June.

The ECB, however, warned of uncertainty including the risk of rising inflation due to a trade war and more defence spending.

Policymakers see a growing chance of an easing pause in April, before rates fall again, four sources told Reuters after the March meeting.

The Federal Reserve kept rates steady on Wednesday, and maintained projections for two further rate cuts this year, though warned of “unusually elevated” uncertainty.

Chair Jerome Powell said President Donald Trump’s policies, including extensive import tariffs, appear to have tilted the economy toward slower growth and at least temporarily higher inflation.

Trump said in a social media post: “The Fed would be MUCH better off CUTTING RATES”.

Markets price in two more rate cuts this year, with a small chance of a third.

The Bank of England held interest rates steady at 4.5% on Thursday, and said while it thought rates were on a gradually declining path it would look “very closely at how the global and domestic economies are evolving.”

With inflation stuck firmly above its 2% target the BoE has been more cautious than many peers. It has cut rates by 75 basis points since it started easing in mid 2024.

Markets expect two more 25 basis point cuts this year.

The Reserve Bank of Australia cut rates in February for the first time this cycle mainly due to the risk of keeping policy too tight for too long. A strong labour market, however, has made the RBA cautious about further easing and the decision to cut was finely balanced, the minutes of that meeting showed.

Markets price in two more rate cuts this year. The RBA says this could be too many.

Norway’s central bank has held rates steady since late 2023, though its governor said in February it is “approaching the time when we can ease monetary policy a little.”

Markets don’t see a cut as likely until at least June, and will watch Norges Bank’s March 27 meeting when it updates its rate projections.

A perennial outlier, the Bank of Japan is in a rate hiking cycle, but it too kept rates steady on Wednesday.

The domestic wage and inflation picture suggests further tightening is likely and markets price at least one 25 bps increase by year-end.

Still, Governor Kazuo Ueda warned of heightening global economic uncertainty, suggesting the timing of further hikes will be influenced by the fallout from U.S. tariff policy.

(Reporting by Yadarisa Shabong in Bengaluru and Alun John in London; Editing by Dhara Ranasinghe and Toby Chopra)