Craig Stirling
10 min read
In This Article:
(Bloomberg) --
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Multiple central banks are set to keep interest rates frozen in the coming week while continuing to gauge the impact of trade disruptions instigated by US President Donald Trump.
From Washington to London, wary officials in countries that account for two fifths of the global economy may display a collective sense of paralysis as they assess risks to inflation and growth from tariffs and stop-start commerce flows. Renewed tensions in the Middle East will only add to their conundrum.
Their challenge was articulated on June 3 by the Paris-based OECD, which cut forecasts for global economic expansion while warning that protectionism is adding to consumer-price pressures. The toll that trade tensions are taking on world prosperity is likely to feature when Group of Seven leaders meet in Canada from Sunday.
Investors will focus most on the Federal Reserve decision on Wednesday, the eve of Trump’s 150th day in power. Observers reckon officials there are still months away from being able to make a settled judgment on the implications of White House policy on the economy.
With policymakers signaling an extended hold on rates, investors and economists will look to Chair Jerome Powell for clues on what might eventually prompt the central bank to make a move, and when.
What Bloomberg Economics Says:
“Amid the uncertainty, the FOMC considers the optimal path is to stay put. We expect the median participant to signal just one 25-basis-point cut in 2025, down from two earlier this year — and a sizable minority may see no cuts at all. That’s a big gap from market pricing, which still leans toward 50 bps. Powell will try to thread the needle, acknowledging softer data but stressing the Fed is in ‘wait-and-see’ mode amid policy uncertainty.”
—Anna Wong, Stuart Paul, Eliza Winger, Estelle Ou and Chris G. Collins, economists. For full analysis, click here
The Bank of Japan, meanwhile, may hold off on a rate move while adjusting bond purchases, and counterparts in the UK and Norway are seen following suit with unchanged borrowing costs.
In all, central banks responsible for six of the 10 most-traded currencies in the world are set for decisions. Among them, only those in Sweden and Switzerland are anticipated by economists to tweak rates, with small cuts predicted for each.
