Central banks turn more cautious on rate cuts

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.

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.

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.

Source: Globalbanking&finance