Interest Rate Cuts Across Major Economies

By Alun John and Dhara Ranasinghe

LONDON (Reuters) – The United States, Britain, and Sweden all cut interest rates this week. Donald Trump's U.S. election win introduced uncertainty amid higher tariff threats.

Seven of the ten major developed-market central banks tracked by Reuters are easing, while two are maintaining higher rates, and Japan is hiking.

1. Switzerland

The Swiss National Bank has led with three rate cuts in 2024, bringing it to 1%. With inflation at a three-year low of 0.6%, another quarter-point cut is expected on Dec. 12. There is a 30% chance of a larger half-point move. SNB officials suggested considering negative rates to make the strong Swiss franc less appealing to investors.

2. Canada

Canada's Bank of Canada has cut rates four times since June, with a 50 basis point cut in October. As inflation has dropped below the 2% target and the economy weakens, another rate cut is likely in December, with a 50% chance of another half-point move.

3. Sweden

Sweden's Riksbank cut its key rate by 50 basis points to 2.75% and indicated a potential reduction in December. Markets foresee a 60% chance of a quarter-point cut, with nearly 100 basis points of easing anticipated by the end of 2025.

4. New Zealand

The Reserve Bank of New Zealand has adopted aggressive rate cuts, having decreased rates by 75 basis points so far. A 50 basis point cut is fully priced for the November meeting and seen as likely in February.

5. Euro Zone

The European Central Bank continues its easing policy, cutting rates for the third time this year in October. While another 25 basis point reduction is priced in for December, expectations for larger cuts have diminished due to stronger-than-expected data.

6. United States

The Federal Reserve reduced interest rates by 25 basis points on Thursday. Chair Jerome Powell indicated the election results wouldn’t impact monetary policy in the near term, aiming to maintain independence despite past clashes with Trump.

7. Britain

The Bank of England cut rates by 25 basis points for the second time since 2020, expecting gradual future cuts. The new Labour government's budget could lead to higher inflation and economic growth, leading to fewer than four cuts through 2025.

8. Norway

Norway’s central bank held its key policy rate at 4.5% and intends to keep it there through the year, expecting reductions to start in Q1 2025.

9. Australia

The Reserve Bank of Australia remains hawkish, keeping rates steady at 4.35%. The RBA does not anticipate inflation to hit its target range until 2026, with only a two-in-three chance of a rate cut by April 2025.

10. Japan

Rising inflation has made Japan's Bank of Japan increase borrowing costs to 0.25%. Since then, rates have remained unchanged amid political turmoil, with markets predicting a 25 basis point hike by January.