Comprehensive Global Monetary Outlook Report

Most of the 23 central banks in this will likely ease more in the coming months due to the US president’s tariffs. Donald Trump faces challenges in persuading the Federal Reserve to lower interest rates; however, global policymakers appear less resistant to such adjustments.  The aggregate measure of advanced-economy rates is expected to decline by over 70 basis points this year, whereas a comparable gauge for global borrowing costs is anticipated to decrease even further. The overarching trajectory of policy indicates a consensus among numerous monetary authorities that Trump’s efforts to bring manufacturing back and reshape trade, if sustained, could pose a greater risk to growth than to consumer price stability.

Here are our estimates regarding the trajectory of monetary policy for the remainder of 2025, encompassing 90 percent of the global economy.

• The Federal Reserve of the United States

The upper bound of the current federal funds rate stands at 4.5 percent. We anticipate a rate of 4.25 per cent by the conclusion of 2025.

Despite the unexpectedly mild inflation figures in the first half of 2025, Federal Reserve officials remain apprehensive regarding price pressures stemming from tariffs. Given the robustness of activity data, the FOMC perceives no immediate necessity to lower rates and opts to await further inflation data throughout the summer. Consequently, we anticipate a singular Fed rate reduction this year—probably in the fourth quarter—falling short of the nearly two cuts that the markets have priced in.

For the US, the implications of tariffs are multifaceted. Elevated import prices pose a risk to increasing inflation and declining growth. We anticipate that this tension will prevent the Federal Reserve from reducing interest rates until late 2025, notwithstanding Trump’s advocacy for more accommodative monetary policy. The implications for the global landscape are clear-cut. Increased tariffs are likely to result in diminished economic growth, reduced inflation, and consequently, a greater need for cuts. The developments in the upcoming months will largely hinge on the trade agreements that materialize, in conjunction with Trump’s ability to astonish, thereby challenging both investors and forecasters. His actions regarding the Fed, for instance, represent a potential catalyst for disruptions in financial markets that may influence rate-setting decisions.

Market pricing indicates that money markets have fully accounted for a quarter-point cut this year, anticipated by October, with an approximate 80 percent probability of a subsequent reduction. In the United States, the discourse surrounding short-term monetary policy has recently become more concentrated, centering primarily on the extent to which tariffs will influence inflationary pressures. Two officials — Fed governors Christopher Waller and Michelle Bowman — have indicated their belief that the impact on prices will be temporary, suggesting that a rate cut may be warranted when policymakers convene on July 29-30 in Washington. The remainder of their colleagues exhibit varying levels of caution, concerned about the potential for a lasting effect on inflation. Seven of the 19 anticipate no reductions in rates throughout the year.

Thus far, the data on inflation has presented a mixed picture. June consumer prices indicated a long-anticipated transmission of tariffs for certain goods; however, the effect remained limited, providing a basis for support among officials across the spectrum of the discussion. Unless an unexpected development occurs, it appears that policymakers are poised to maintain rates this month, with potential cuts anticipated at their mid-September meeting. Currently, Trump’s calls for reduced rates and his personal criticisms of Chair Jerome Powell have escalated, coinciding with the White House’s assessment of potential successors for Powell, whose tenure as chair concludes in May. Trump has committed to selecting an individual who will implement rate cuts, thereby suggesting that the new chair may face challenges in establishing credibility with both investors and fellow Fed officials from the outset.

• European Central Bank

The prevailing deposit rate stands at 2 per cent. We projects a forecast of 1.5 percent for the end of 2025.

The increase in US tariffs on exports from the EU, particularly the duties on pharmaceutical products threatened by Trump, is expected to exert a constraining influence on the euro-area economy and generate an additional disinflationary pressure. The ECB is likely to react by reducing rates once more by 25 basis points in September and again by the same margin in December, resulting in a deposit rate of 1.50 per cent. That should signify the conclusion of the cycle.

Market pricing indicates that traders anticipate a further quarter-point cut this year, expected to occur in December. The European Central Bank appears to be relatively satisfied with the outcomes of its initiatives aimed at combating inflation. Prices are currently increasing at the intended rate, while interest rates remain at that same level. The consensus suggests that the ECB is adequately positioned to address any forthcoming challenges, particularly those related to trade, as Europe and the US negotiate a conclusive agreement aimed at mitigating the potential impact of Trump’s tariff threats. One of the primary concerns is that the euro zone’s sluggish economic performance may render the inflation shortfall anticipated by ECB economists for 2026 more enduring. A deterioration of these concerns would support additional monetary easing, although critics worry about the inflationary effects of increased public expenditure on defense and infrastructure.

• Bank of Japan

Target rate (upper bound): 0.5 percent. We anticipate a rate of 0.75 percent by the conclusion of 2025.

Market pricing indicates that a rate hike is perceived as more probable than not, with a 65 percent likelihood assigned to a quarter-point increase by year-end. Bank of Japan Governor Kazuo Ueda is widely anticipated to maintain his wait-and-see approach this quarter prior to increasing the benchmark rate in subsequent months. Ueda has indicated “extremely” high uncertainty arising from Trump’s tariff measures and has emphasized the importance of verifying their economic impacts through concrete data rather than relying solely on anecdotal evidence.

The outcomes of the upper house election on Sunday provide additional justification for the BOJ to adopt a wait-and-see approach, as market participants assess the ramifications for the economy and financial markets. With inflation persisting at high levels, Prime Minister Shigeru Ishiba’s minority government has faced challenges in securing support. With another rate hike widely anticipated in the fourth quarter or early 2026, analysts will be monitoring indications from the BOJ regarding its rate trajectory and how the uncertainties surrounding Japan’s economy might be resolved.

“We have revised our forecast for the Bank of Japan’s rate hike, now anticipating it in October rather than July.” The political and market environment is demonstrating a lesser inclination towards reducing stimulus than we had anticipated. Inflation appears poised to remain significantly above the 2 percent threshold, bolstered by increases in wages and heightened price expectations. However, the impasse in US-Japan trade negotiations and the rising yields on Japanese government bonds, driven by fiscal apprehensions as the political discourse shifts towards budgetary strategies to address the cost of living crisis, have generated excessive uncertainty for the Bank of Japan to take action at this moment.

• Bank of England

The prevailing bank rate stands at 4.25 percent. We anticipate a rate of 3.75 percent by the conclusion of 2025.

Market pricing indicates that participants are anticipating an additional quarter-point reduction in September, with a probability of approximately 90 percent assigned to the likelihood of a subsequent cut. The Bank of England is anticipated to maintain its quarterly cadence for rate cuts next month, following indications that the UK labor market is swiftly declining. Governor Andrew Bailey has highlighted data indicating a significant decline in employment following the impact on businesses in April due to an increase in payroll taxes and an additional rise in the minimum wage. Inflation in cooling services, coupled with a series of disappointing growth indicators following a robust beginning to the year, has heightened the likelihood of a quarter-point reduction in borrowing costs during the Monetary Policy Committee’s meeting on Aug. 7. This would mark the fifth reduction since the Bank of England commenced its rate-lowering strategy a year prior.

“The Bank of England finds itself in a challenging predicament.” Inflation currently exceeds 3 percent and is projected to persist at this level until the spring of 2026. Concurrently, the economy exhibits signs of weakness, and the labor market is showing indications of softening. The central bank is expected to adopt a measured approach to easing. Anticipated reductions are projected for August and November of this year, culminating in a final adjustment in February 2026.

• Bank of Canada

The prevailing overnight lending rate stands at 2.75 percent. Bloomberg Economics projects a rate of 2.25 percent by the conclusion of 2025.

Market pricing indicates that traders assign a 65 percent probability to a quarter-point cut occurring by year-end. The Bank of Canada is anticipated to maintain its policy rate at 2.75 per cent for a third consecutive meeting on July 30, as officials consider the implications of persistently high core inflation in the context of the ongoing trade war. Employment data exceeded expectations in June, indicating that although certain sectors reliant on US demand are experiencing the effects of tariffs, the overall job market is not undergoing a swift decline. Concerns persist regarding fiscal policy, as Prime Minister Mark Carney has committed to increasing defense and infrastructure spending, while simultaneously urging the government and public service to reduce expenditures. In April, the bank decided to forgo point economic forecasts due to increasing trade uncertainty — it remains uncertain whether policymakers led by Governor Tiff Macklem will recommence the publication of an inflation and growth outlook in July.

“The consequences of trade tensions should become evident as second quarter and third quarter GDP data show economic activity slowing through mid-year. The labor market is expected to continue its cooling trend as businesses postpone their expansion plans. The Bank of Canada has maintained the overnight rate at a neutral level; however, we anticipate that concerns regarding growth will overshadow inflation risks in the latter half of the year. The expectation is for the Governing Council to reduce its rate target by 25 basis points in both the third and fourth quarters, followed by a prolonged period of stability.

Central banks of the Brics nations

• People’s Bank of China

The prevailing 7-day reverse repo rate stands at 1.4 percent. We project a growth rate of 1.2 percent by the end of 2025.
The PBOC has recently indicated that it is not in a hurry to further ease monetary policy, following its rate cuts and the reduction of reserve requirements for banks in early May, aimed at mitigating the effects of increased US tariffs. China recorded robust economic growth in the second quarter, driven by preemptive export orders and government incentives for consumers.
However, the economy continues to grapple with deflation and subdued consumer confidence, as exports are expected to decelerate in light of tariff uncertainties. Analysts anticipate that the PBOC will implement slight reductions to the policy rate and the reserve requirement ratio for banks in the fourth quarter in response to a deceleration in economic growth. The stability of the yuan is expected to create opportunities for easing measures.

In May, the PBOC reduced the policy rate by 10 basis points to 1.4 percent and decreased the reserve requirement ratio by 50 basis points, resulting in an effective RRR of 6.2 percent, down from 6.6 percent. Policymakers are dedicated to enhancing sentiment and fostering growth in the face of trade challenges. Further reductions of 20 basis points in the policy rate and an additional 50 basis points in cuts to the RRR are anticipated by year-end. The central bank may take its next action towards the end of the third quarter.

Reserve Bank of India

The prevailing repurchase rate set by the RBI stands at 5.5 percent. We project a 5 per cent outcome by the end of 2025.

The Reserve Bank of India’s June monetary policy review and liquidity measures have left the bond market in a state of confusion. The central bank has reduced the repo rate by 50 basis points to 5.5 per cent, changed its stance from ‘accommodative’ to ‘neutral,’ and lowered the cash reserve ratio by 100 basis points, effective September. Subsequently, it initiated the process of draining excess liquidity to rectify distortions in short-term rates, resulting in an increase in bond yields.
The market’s response prompted Governor Sanjay Malhotra to elucidate in interviews that interest rates may decrease if inflation falls beneath the RBI’s forecast of 3.7 percent or if growth decelerates beyond the anticipated 6.5 percent for the fiscal year concluding in March. Most analysts do not foresee a reduction in the review scheduled for August 6; however, the recent trend of softer inflation has prompted many to predict at least one additional cut later in the year, potentially in October or December.

“The RBI’s hawkish shift in June to neutral from accommodative raises the bar for further easing. A historically low rate differential with the United States indicates that the Reserve Bank of India will adopt a wait-and-see approach, anticipating a move from the Federal Reserve before taking action. Our base case anticipates a hold in August. Nonetheless, inflation continues to register significantly lower than the RBI’s June forecast, indicating that the easing trend is likely to persist. Our forecast anticipates a reduction of 50 basis points in the fourth quarter of 2025.

• Central Bank of Brazil

The prevailing Selic target rate stands at 15 percent. We project a forecast of 15 percent by the end of 2025.

In June, Brazil’s central bankers elevated the benchmark interest rate to a two-decade peak of 15 percent, indicating that their tightening measures have probably reached their conclusion. Analysts anticipate that the bank will initiate a process of easing in the upcoming year as economic conditions soften due to the influence of borrowing costs that rank among the highest globally. The robust labor market, coupled with a fiscal deficit exceeding 7 percent of gross domestic product, has introduced complexities into the central bank’s efforts to combat inflation. Concerns among investors are mounting regarding President Luiz Inacio Lula da Silva’s potential increase in spending in anticipation of the upcoming reelection campaign, a move that could complicate the responsibilities of policymakers further. The bank is facing the challenge posed by Trump’s threat to implement 50 per cent tariffs on all goods imported from Brazil.

Brazil’s policy rate is currently at 15 per cent, marking its highest level since 2006, with the central bank indicating in June that it does not intend to make adjustments in the near future. The unpredictable element is Trump’s proposed 50 percent tariff on Brazilian exports, announced on July 9. Should an agreement be attained, we anticipate that rates will remain stable until 2025, followed by reductions in early 2026. However, should tariffs be implemented and Brazil respond with retaliation, the resulting slowdown in growth may compel the BCB to reduce rates sooner than anticipated—potentially leading to inflation exceeding the target for an additional year.

• Bank of Russia

Current key rate: 20 percent. The median forecast from economists for the end of 2025 stands at 17 percent.
The Bank of Russia has indicated a probable reduction in the key rate during the upcoming policymakers’ meeting on Friday, following a decrease of 100 basis points from a peak of 21 percent in June. Governor Elvira Nabiullina continues to express caution regarding persistent proinflationary risks. She indicates that should price growth cease to ease sustainably or start to accelerate once more, the bank may consider pausing rate cuts or potentially reversing them in the coming months to achieve the 4 percent inflation target for the next year.

• South African Reserve Bank

The prevailing average rate for repos stands at 7.25 percent. We project a 7 per cent outcome by the end of 2025.

Following the resumption of its rate-cutting cycle in May, the South African Reserve Bank is poised to continue this trend, reducing borrowing costs by 25 basis points to 7 percent in the current quarter, attributed to a favorable inflation environment. It remains uncertain whether the reduction will occur this month or during the September meeting. Central bank officials are likely to adopt a cautious stance as they prepare for the implementation of Trump’s trade tariffs, set to commence on August 1, which will impose a 30 percent levy on imports from South Africa. Governor Lesetja Kganyago cautioned that the ambiguity surrounding tariffs is complicating the policy-making process significantly. “The significant aspect of the tariffs is that they would affect economic activity,” Kganyago stated. “What you will face is that you might end up with inflation yourself.”

“The SARB is expected to implement at least one rate cut in the second half of 2025 from the current 7.25 per cent, given that inflation is performing below expectations. Price growth is expected to accelerate, yet remain close to the lower boundary of the 3–6 percent target starting in June. It is projected to exceed 4 percent in the fourth quarter of 2025 and maintain that level throughout 2026. However, with the bank seeking to reduce its target midpoint to 3 percent, the easing will be limited. This prudent strategy will maintain inflation at its present levels.

Other G-20 monetary authorities

• Banco de México

Current overnight rate stands at 8 percent. Bloomberg Economics anticipates a 7 per cent outcome by the conclusion of 2025.

Mexico’s central bank indicated a likely deceleration in the pace of monetary easing following its decision to reduce the key rate to 8 per cent in June. The central bank has reduced the rate by 50 basis points at each of its last four meetings, reflecting a deteriorating growth outlook amid the prevailing uncertainty surrounding Trump’s tariffs. Nonetheless, given that inflation remains elevated relative to the target, analysts predict that the central bank will refrain from implementing rate cuts prior to year-end.

“Given the prevailing tight monetary conditions and forecasts indicating a deceleration in inflation alongside a rise in economic slack for this year and the next, it is probable that policymakers will persist in their rate-cutting measures. The outlook is bolstered by a depreciating dollar and anticipations of reduced interest rates in the United States. Banxico is expected to moderate the pace of easing, implementing a 25 basis point cut in interest rates during its meetings in August, September, November, and December.

• Bank Indonesia

The prevailing 7-day reverse repo rate stands at 5.25 percent. We anticipate a 5 per cent outcome by the conclusion of 2025.

Bank Indonesia indicated that further easing is forthcoming following a significantly enhanced trade agreement with the US, which has alleviated a major source of uncertainty for policymakers. BI surprised markets with a policy rate cut this month, occurring just hours after Trump consented to reduce Indonesia’s tariff rate to 19 per cent from 32 per cent, thereby positioning it among the lowest rates in the region. According to BI Governor Perry Warjiyo, the trade deal is expected to bolster the rupiah and other Indonesian assets, while inflation is anticipated to moderate this year. This development should provide policymakers with the flexibility to reduce borrowing costs in an effort to stimulate the lackluster consumption and bank lending that pose a risk to growth in Southeast Asia’s largest economy.

Bank Indonesia is exploring avenues for a more aggressive reduction in rates to bolster economic growth. The total easing has amounted to 75 basis points this year, with an acceleration in the pace following each of its 25 basis-point adjustments. In July, it indicated a readiness to implement a more substantial 50 basis-point reduction in the future, as the economic conditions necessitate. The stability of the Rupiah is expected to remain crucial, and this should not be assumed as a certainty, given that the effects of US tariffs may exert a greater influence on markets in the latter half of the year.

• Central Bank of Turkey

The prevailing 1-week repo rate stands at 46 percent. We project a 35 percent outcome by the end of 2025.

Turkey’s central bank is anticipated to recommence its rate reductions as soon as next week, following a period of political instability stemming from the imprisonment of President Recep Tayyip Erdogan’s primary opponent in March, which had interrupted the policymakers’ cutting trajectory. Analysts, however, are struggling to assess the magnitude of the initial reduction since March. An unanticipated tax hike on lira-denominated deposits and funds by the finance ministry, coupled with Governor Fatih Karahan’s hawkish remarks to investors in London last week, is leading some to foresee a more prudent approach. Conversely, others argue that seasonal factors will enable the bank to implement a more substantial reduction. Inflation decelerated to 35.1 percent in June, as authorities aim for a target of 24 percent by year-end.

“We anticipate that the CBRT will recommence rate reductions during its July meeting, given the prevailing conditions of diminishing inflation and decelerating growth.” The pace of cuts appears to be subdued, reflecting the gradual buildup of reserves, the persistent depreciation of the lira, and the inflationary pressures stemming from fiscal policies. The key policy lever is projected to decline to 41 per cent by the end of the third quarter, down from the current 46 per cent.

• Central Bank of Nigeria

The prevailing rate set by the central bank stands at 27.5 percent. We anticipate a figure of 26.5 percent by the conclusion of 2025.

Governor Olayemi Cardoso is expected to maintain the rate at 27.5 per cent for a minimum of one additional meeting when his monetary policy committee announces its next decision on July 22, as officials seek further clarity on inflation.
Price pressures moderated once more in the previous month; however, the data series underwent its first rebasing in 16 years in January, which complicates the interpretation of the underlying trend. Import prices have benefited from the stability of the naira, even amid the uncertainty surrounding US trade tariffs that have led to a decline in oil prices, which is Nigeria’s primary source of dollar earnings. However, it is essential for policymakers to keep a close watch on flood risks in critical agricultural regions, as these factors may lead to an increase in food prices.

“Nigeria is poised to initiate rate cuts in September from the existing level of 27.5 per cent, contingent upon the emergence of clear evidence indicating a sustained deceleration in inflation as measured by a new price index.” The appreciation of the naira, coupled with the onset of the harvest season in September, is expected to bolster the ongoing disinflationary trend. Annual inflation is anticipated to decline below 20 percent in the third quarter, with a further easing projected to the mid-teens by year-end, thereby allowing for a gradual cycle of policy loosening.

• Bank of Korea

Current base rate stands at 2.5 percent. We anticipate a 2 per cent outcome by the conclusion of 2025.

The Bank of Korea continues to pursue an accommodative monetary policy aimed at bolstering growth in an economy that is struggling, particularly in light of the challenges posed by Trump’s trade tariffs. The challenge is in determining the optimal moment to reduce rates once more, as the central bank seeks to navigate the delicate equilibrium between providing stimulus and ensuring financial stability. Governor Rhee Chang Yong indicated that forthcoming rate reductions will be contingent upon the risks associated with US trade policy and an overheating housing market that is exacerbating household debt. The BOK must also consider the implications of a 31.8 trillion won supplementary budget assembled by the newly elected government of President Lee Jae Myung. Nonetheless, the comprehensive US tariffs and specific duties imposed on critical sectors like automobiles and steel continue to represent the most significant obstacles looming over the nation’s trade-reliant economy.
According to Bloomberg Economics:

“The BOK is considering additional rate cuts to support weak domestic demand and address increasing risks from US tariffs.” Nevertheless, it is probable that it will proceed with caution. What is the rationale behind this? Concerns are mounting regarding financial stability risks arising from the housing boom in the Seoul region. We anticipate that the BOK will reduce its policy rate to 2 percent by the end of the year, implementing two further cuts of 25 basis points each, potentially commencing as soon as August, contingent upon indications of stabilization in the housing market.

• Reserve Bank of Australia

Current cash rate target stands at 3.85 percent. We anticipate a rate of 3.35 percent by the conclusion of 2025.

The RBA surprised both investors and economists by maintaining rates in July, with Governor Michele Bullock indicating a prudent stance regarding potential cuts as policymakers look for inflation data. Predictions from economists and financial markets indicate that the next move is anticipated in August, contingent upon the second-quarter inflation figures released later this month, which are expected to reveal whether price pressures continue to ease. The primary source of uncertainty currently lies in the repercussions for Australia’s export-oriented economy stemming from Trump’s tariffs. The RBA’s evaluation to date indicates that the initial impacts of US tariffs on Australian products are comparatively modest. Although it remains early in the analysis, the dire forecasts regarding trade have not yet materialized.

“The pause in July confirmed our view that the RBA’s easing cycle was likely — barring a significant downside shock — to be a cautious, gradual and data dependent one. We anticipate further reductions of 25 basis points in both August and November as part of our base case scenario. Further rate cuts are anticipated in 2026, resulting in a cash rate of 2.5 per cent, which is below the RBA’s revised estimate of the neutral cash rate.

• Central Bank of Argentina

Argentina’s central bank has shifted its focus to targeting monetary aggregates. Under its $20 billion agreement with the International Monetary Fund signed in April, Argentina pledged to rigorously limit the growth of the money supply in order to reduce inflation. The country has also eliminated numerous stringent currency controls and implemented a flexible exchange rate band for the peso. Bank interest rates surged significantly beyond anticipated inflation levels, constraining credit expansion and resulting in an increase in loan defaults. In anticipation of the October elections, the administration of Javier Milei aims to maintain the strength of the peso while fostering a resurgence in economic activity.

“The BCRA’s emphasis on monetary aggregates indicates that interest rates are endogenous—determined by the interplay of market demand and supply for money—and consequently exhibit greater volatility. We anticipate that these market-based rates will remain high in the upcoming months, with a possibility of easing following the October midterm elections, contingent upon an increase in foreign investment flows.

 G-10 currencies and Eastern European economies

• Swiss National Bank

Current policy rate stands at 0 per cent. We anticipate a forecast of -0.25 percent by the end of 2025.

The Swiss National Bank may soon establish itself as the first central bank globally to revert interest rates to negative levels. In light of a robust franc exerting downward pressure on prices, policymakers shifted their stance last month from concluding their easing measures to implementing an additional rate cut, thereby reducing the benchmark to zero. Nearly one-third of economists anticipate a shift to -0.25 percent at the upcoming meeting on September 25. The appreciation of the franc can be attributed to the relative weakness of the dollar, prompting officials to closely monitor developments in Trump’s trade policies while also keeping an eye on inflation metrics. It recently increased to 0.1 per cent, yet it continues to pose a risk to the SNB’s 0-2 per cent target. President Martin Schlegel has indicated that the threshold for reintroducing negative rates is elevated compared to a standard rate cut; however, external pressures from global markets could compel a reconsideration of this stance.

“Despite a cut to zero, the SNB has failed to halt the franc’s appreciation, which remains up more than 9 per cent against the US dollar since ‘Liberation Day.’ This sustained strength threatens an already weak price dynamic, increasing the likelihood of a policy response in the coming quarters.” A 25 basis-point rate cut into negative territory appears to be the most probable subsequent action, possibly alongside opportunistic foreign-exchange interventions. We believe that the primary risk to this scenario lies in a public backlash against the reintroduction of negative rates, rather than apprehensions regarding financial stability.

• Sveriges Riksbank (Sweden)

Current policy rate stands at 2 per cent. We anticipate a rate of 1.75 per cent by the conclusion of 2025.

Sweden’s central bank seems ready to reduce borrowing costs once more later this year in an effort to bolster a fragile economy affected by erratic US tariff policies. Riksbank officials lowered their rate to a 2 1/2 year low of 2 per cent in June, indicating that there exists “some probability” of further adjustments should growth continue to be subdued and inflation expectations remain stable. Recent Swedish sentiment surveys and retail data indicate a pessimistic outlook, with inflation slightly exceeding expectations in June. The July consumer-price report, scheduled for release on August 7, will serve as a crucial indicator prior to the forthcoming Riksbank decision later this month.

“The potential for increased sectoral US tariffs on European goods is expected to exert additional pressure on Swedish growth, likely leading to further easing measures from the Riksbank.” The central bank is expected to reduce the policy rate to 1.75 percent in September, down from the current 2 percent. “If US-EU trade talks fail, which poses a risk to growth prospects, the cut we have penciled in for September could be brought forward to August.”

• Norges Bank (Norway)

The prevailing deposit rate stands at 4.25 percent. Central bank guidance for the end of 2025 indicates a range of 3.75 percent to 4 percent.

Following its most significant surprise in years with a rate cut in June, after a prolonged pause at the peak of its hiking cycle, Norway’s central bank is anticipated to continue its post-pandemic easing in September. Norges Bank has concentrated on inflation outcomes that have been lower than anticipated in recent months, choosing to align with its counterparts in easing monetary restraint, despite the fact that the energy-abundant Norwegian economy has largely sidestepped the repercussions of elevated borrowing costs. Given that core inflation continues to linger above 3 per cent, it is probable that officials, under the leadership of Governor Ida Wolden Bache, will adopt a cautious stance despite their recent shift in policy. A strong labor market and a recent increase in home prices indicate that households might be positioned to support an additional enhancement in domestic demand, despite the uncertainty surrounding US trade policies that casts a shadow over the export outlook. The June rate trajectory suggests the possibility of up to two additional reductions in 2025, culminating in a terminal rate of approximately 3 percent by the conclusion of 2028.

• Reserve Bank of New Zealand

The prevailing cash rate stands at 3.25 percent. We project a rate of 2.75 percent by the end of 2025.
The RBNZ’s concerns about elevated near-term inflation are unlikely to persist — ongoing weak demand and a sluggish labor market will prompt the central bank to resume easing. We anticipate that rate cuts will recommence during the August meeting. The RBNZ anticipates that the OCR will decline to slightly above neutral levels. It will need to implement more significant reductions. The RBNZ is anticipated to implement an extra 75 basis points in rate reductions by the first quarter of 2026, resulting in an official cash rate of 2.5 per cent, which is 40 basis points beneath their neutral estimate.

The RBNZ decided to pause its easing cycle in July, maintaining rates for the first time in seven meetings to evaluate a rise in inflation. Officials anticipate the possibility of resuming rate cuts should price pressures diminish as expected, thereby reinstating a clear easing bias. Although inflation may approach the upper limit of the RBNZ’s 1-3 percent target band later this year, recent data indicate a deteriorating economy that is probably in need of additional monetary support. Market participants are anticipating at least one additional quarter-point reduction in the cash rate this year to 3 per cent, with some analysts projecting a decline to as low as 2.5 per cent by early 2026.

• National Bank of Poland

The prevailing cash rate stands at 5 percent. The median forecast from economists for the end of 2025 stands at 4.75 percent.
Poland’s central bank Governor Adam Glapinski has once again caught markets off guard with an unexpected rate cut in July. The reduction — the second this year — was characterized as a “cautious adjustment” rather than the initiation of an easing cycle. However, as consumer-price increases are expected to decelerate in the upcoming months, further reductions appear probable. Glapinski did not dismiss the possibility of an additional reduction later in the year, contingent upon inflation falling within the central bank’s tolerance range, as indicated by current staff forecasts. Policymakers might be concerned about a resurgence in trade tensions alongside ongoing loose fiscal policies, both of which are expected to endure.

• Czech National Bank

The prevailing cash rate stands at 3.5 percent. The median forecast from economists for the end of 2025 stands at 3.25 percent.

The Czech central bank is expected to maintain its interest rates for the foreseeable future, following a period of inconsistent easing that concluded with two reductions this year. Investors have moderated their expectations for additional declines, and forward prices indicate a market divided between stable rates and the possibility of one more reduction within the next year. Given the persistence of services inflation, policymakers regard the escalating property market as a significant risk for the future. Plans to increase the budget deficit as a result of defense spending could contribute to additional price pressures, as noted by Governor Ales Michl, who has committed to upholding “very strict” policy measures. “All options are open, but at the moment it appears that rates will remain at the current level for an extended period,” he stated following the last meeting.

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