Central Banks Set Diverse Economic Paths for 2025

Overview

2025 promises to be a year of divergence for central bank policymaking as economic trajectories take distinct paths. While the United States remains on hold, the euro zone embarks on interest rate cuts, and Japan maintains its hiking stance.

Central Bank Outlooks

1. Switzerland

* Swiss National Bank (SNB) has eased monetary policy, cutting benchmark rates from 1.75% to 0.5% in 2024.
* Inflation well within SNB's target range; further 25 basis point cut expected in March.
* Chairman Martin Schlegel has considered negative interest rates.

2. Canada

* Bank of Canada (BoC) reduced key policy rate by 25 basis points to 3% on Wednesday.
* Growth forecasts trimmed; tariff war concerns raised.
* BoC anticipates further rate cuts, likely after a March pause.

3. Sweden

* Riksbank cut rates by 25 basis points to 2.25% on Wednesday to boost growth.
* Governor Erik Thedeen suggests no more rate cuts, but remains vigilant to changing economic conditions.

4. New Zealand

* Reserve Bank of New Zealand has slashed interest rates by 125 basis points since August.
* Recession in the third quarter; further 50 basis point cut expected next month.

5. Euro Zone

* European Central Bank (ECB) reduced rates by 25 basis points on Thursday.
* Inflation concerns eased; further rate cuts remain on the table.
* Traders expect three additional 25 basis point cuts this year.

6. United States

* Federal Reserve (Fed) held interest rates steady on Wednesday.
* Chairman Jerome Powell advocates a cautious approach, awaiting economic data before considering further cuts.

7. Britain

* Bank of England expected to cut rates by 25 basis points next week.
* Balancing high inflation and slowing economy.
* Traders foresee two more cuts this year.

8. Norway

* Norges Bank yet to cut rates this cycle; rates remain at 17-year high of 4.5%.
* Three rate cuts projected this year.

9. Australia

* Reserve Bank of Australia considering a rate cut; inflation has cooled to 2.4%.
* Markets predict a 25 basis point cut in February, with three cuts expected for the year.

10. Japan

* Bank of Japan, the sole G10 central bank in a hiking cycle, raised rates to 0.5% in 2024.
* Inflation forecasts revised upward; former policymaker predicts further rate hikes to 1.5% over the next two years.