By Yadarisa Shabong and Alun John
LONDON (Reuters) – U.S. President Donald Trump’s tariffs have darkened the global economic backdrop, forcing big central banks to reassess their next steps.
Policymakers outside the United States now look more likely to cut interest rates than they would have done otherwise – or in Japan’s case raise them less.
The U.S. Federal Reserve is in a tricky position.
Here’s a look at where 10 developed-market central banks stand.
1/ SWITZERLAND
The Swiss National Bank does not meet until June, but it will be an interesting one, as markets expect it to cut rates to zero from 0.25%.
The SNB says it would rather not go further and return to negative rates, but a surging Swiss franc is hurting an export-heavy economy and could push Switzerland into deflation.
The franc is the best performing developed market currency since Trump’s April 2 tariff announcement. The SNB’s other oft-used policy tool, intervening to weaken the franc, could provoke the Trump administration, which says currency manipulation was one of the motivations for its tariffs.
2/ CANADA
The Bank of Canada held rates at 2.75% on Wednesday – its first pause after seven consecutive cuts – saying it wanted more information on the impact of tariffs.
Governor Tiff Macklem said uncertainty made it difficult to make economic predictions, noting: “Forecasts for economic growth are of little use as a guide to anything.”
Still, traders bet on possibly two more cuts by year-end.
3/ NEW ZEALAND
The Reserve Bank of New Zealand cut its key rate by 25 basis points to 3.5% last week, with a total of 200 bps of easing since August.
New Zealand is exposed to China, leaving it at risk of damage from a sustained China-U.S. trade war. Markets expect roughly three more cuts this year, even though data Thursday showed higher-than-expected inflation.
4/ SWEDEN
Sweden left rates at 2.25% in March and expects to keep them at this level for now.
Its Riksbank had been in the dovish camp, easing rates from 4% to support a sluggish economy, but markets agree with policymakers that further cuts are unlikely.
5/ EURO ZONE
The European Central Bank cut interest rates for the seventh time in a year on Thursday and hinted more easing could follow.
It said the growth outlook had deteriorated due to rising trade tensions, and the volatile market response would likely cause financial conditions to tighten.
The ECB’s key rate now 2.25% and markets currently see two or three more 25 bps cuts this year.
6/ UNITED STATES
The Fed has a dilemma since it expects tariffs to both lower economic growth and push inflation higher.
That has left it in wait-and-see mode chair Jerome Powell said on Wednesday. Markets expect the Fed to hold rates steady in May before resuming cuts later on.
It has been on hold all year, having cut by 100 bps in 2024. But until Trump paused some “reciprocal” tariffs last week, traders had anticipated a cut next month to shore up growth. In a further complication, Trump said Powell’s termination “cannot come fast enough” on Thursday, and called for the U.S. central bank to cut rates.
7/ BRITAIN
Markets see a more than 80% chance of a quarter-point rate cut by the Bank of England in May, and expect it to continue at its roughly one-cut-a-quarter pace for the rest of 2025.
The BoE has cut slower than many peers, as it expects inflation to pick up. March’s cooler-than-expected print should give it confidence to cut next month however.
8/ AUSTRALIA
Australia only started easing in February, but markets now expect more urgency, seeing a chance of a larger 50 bps move in May and nearly 125 bps of cuts this year.
Its economy is exposed to China-U.S. trade tensions. China is Australia’s biggest trading partner, so markets have ramped up rate cut bets as tensions rise.
9/ NORWAY
Norway’s central bank kept rates on hold at a 17-year high of 4.50% last month, as an unexpected resurgence of inflation led policymakers to postpone earlier plans to cut.
Still, markets expect a cut in June with more to follow.
10/ JAPAN
The Bank of Japan remains the developed-market outlier. It is in hiking mode, though tariffs have complicated matters.
Governor Kazuo Ueda said the BOJ may need to act if tariffs hurt the economy, signalling it could pause its cautious rate-hike cycle, which has brought rates up to 0.5%.
However, that could cause recent yen appreciation to stop or even reverse, potentially angering Trump. Japanese officials already fear the slow pace of rate hikes from ultra-low levels could come under fire in trade negotiations, even if it did not come up in the first round of talks.
(Reporting by Alun John and Yadarisa Shabong, Editing by Dhara Ranasinghe and Joe Bavier)
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