The first US cut of 2025 follows global 36-hour interest-rate frenzy
The upcoming US interest rate cut, marking the first since Donald Trump resumed the presidency, is poised to take center stage in a week that will shape policy decisions for half of the world’s ten most-traded currencies. Beginning with the Bank of Canada and followed by the Federal Reserve on Wednesday, the focus will then shift to the Bank of England the next day, culminating with the Bank of Japan. Central banks may adjust borrowing costs, prepare investors for their intentions in the final quarter of the year, or potentially do both.
By the end of the week, rates impacting two-fifths of the global economy, including four of the Group of Seven industrialized nations, will have been adjusted or confirmed. A US rate cut long sought by Trump’s White House is anticipated to be a significant focus. The standoff regarding Fed policy, which contrasts Trump’s emphatic demands for reduced borrowing costs with Chair Jerome Powell’s apprehensions about inflation driven by tariffs, looms over the meeting. Recent signs of weakening in the labor market have, however, provided a green light for what most economists anticipate will be a quarter-point rate cut. Insights says that “We expect the FOMC to cut rates by 25 basis points.” That will not be the case, as economic data pertaining to both aspects of the Fed’s mandate – price stability and full employment – support this conclusion. Instead, the markets anticipate a rate cut, the White House is in favor of it — and we believe Powell is acting in what he perceives as necessary to protect the Fed’s independence from further threats.
Policymakers in Canada and Norway are anticipated to adjust rates by the same magnitude, whereas their counterparts in other advanced economies may adopt a more cautious approach. The BOE is likely to maintain rates at their current level following an August cut that showcased an unusual three-way split among officials. The BOJ, meanwhile, continues to pursue a path toward tightening but has not indicated that such a step is imminent. Central banks in other major economies are anticipated to adopt a vigilant approach while refraining from altering rates. Economists have forecasted that this will be the outcome for Indonesia, Brazil, and South Africa. In other regions, notable economic reports from China, inflation statistics spanning Japan, the UK, and Israel, Swiss export figures, and a credit ratings assessment of Italy could stand out as significant highlights. Investors will be closely monitoring the latest developments stemming from international trade conflicts, particularly following China’s initiation of two investigations aimed at the US semiconductor sector. Before the Fed makes its decision on rates, they will have one final opportunity to assess the American consumer. On Tuesday, retail sales are expected to have increased by 0.3% in August, following significantly larger increases in the previous two months.
Amidst a labor market facing uncertainty and escalating prices, the duration for which consumers will continue to open their wallets remains uncertain. Economists will monitor jobless claims on Thursday to determine whether the increase in the previous week signals a prolonged decline in the labor market or if it is merely an isolated incident. Further north, inflation in Canada is anticipated to rise to 2% on a yearly basis, while the central bank’s preferred core measures are expected to remain stable at approximately 3%, based on the median estimate in a survey of economists. The reading is unlikely to prevent the Bank of Canada from reducing its benchmark overnight rate to 2.5% on Wednesday, considering the recent disappointing jobs data and an economic contraction in the second quarter. Canada’s easing cycle has yet to invigorate the sluggish real estate market, and data on existing home sales and housing starts will provide the most recent insight into activity. China begins the week with a significant release of August data on Monday — including retail sales, industrial output, investment figures, and the jobless rate — providing insight into whether targeted support is bolstering demand following a widespread slowdown in July.
Property metrics will reveal the extent of the ongoing housing slump. Additionally, on Monday, data is expected to reveal that India’s trade deficit likely decreased in August, while Pakistan’s central bank is set to maintain its interest rates once more. On Wednesday, Japan will release its trade balance figures, while Singapore will report on its non-oil shipments, which serve as a key indicator for the global electronics market. On the same day, Bank Indonesia convenes, with the decision emerging amidst protests and the sudden exit of Finance Minister Sri Mulyani Indrawati. Policymakers are anticipated to maintain their position following consecutive reductions. On Thursday, New Zealand’s GDP and Australia’s jobs report will be released, both of which are essential for shaping the outlooks of their respective central banks. Friday is dedicated to Tokyo, as Japan’s CPI release is anticipated, followed by the BOJ’s policy decision, where it is expected to maintain rates at their current levels. Investors will be closely examining whether Governor Kazuo Ueda indicates the possibility of future rate hikes as growth remains robust and inflation continues to rise.
In other regions, New Zealand releases its trade data, Malaysia presents both trade and current-account balances, Hong Kong provides an update on its balance of payments, and China announces its FX settlement flows. On the eve of the BOE decision, UK inflation data will be released. The headline rate is expected to remain at 3.8%, concealing a subtle decline in the services gauge. The central bank has forecasted a peak of 4% in September. Economists are in agreement that the BOE will maintain its key rate at 4%. However, a split vote is anticipated once more, as a minority of policymakers advocate for an immediate reduction. The primary emphasis on Thursday will be on the measures taken to reduce the BOE’s bond holdings established during the crisis. In light of the recent market turmoil, officials are expected to considerably reduce the current rate of quantitative tightening, which stands at £100 billion ($135 billion) annually.
The rate decision in Norway on the same day is expected to present more challenges than usual. Most economists expect a tight decision regarding whether Norges Bank officials will adhere to their June guidance and implement another quarter-point reduction in the key rate, bringing it down to 4%. Alternatively, they might delay a reduction as recent data revealed core inflation remaining above 3%, while corporate sentiment suggested a consistent improvement. Beginning Wednesday, the European Central Bank will host a two-day conference that could serve as a significant platform for policymakers to share their insights following the recent decision to maintain their interest rate. President Christine Lagarde is set to participate in a meeting of euro-zone finance ministers later this week. Among the data releases, the trade numbers on Monday, industrial production the following day, and a final reading of inflation on Wednesday stand out as the key highlights. On Tuesday, Germany’s ZEW investor confidence gauge is set to be released. On Friday, credit assessments will be conducted for several important euro-area borrowers. Included in the schedule are Italy from Fitch Ratings, Greece from Moody’s Ratings, and France from Morningstar DBRS.
Swiss export numbers set to be released on Thursday could gain increased importance as officials strive to secure a trade deal aimed at reducing the highest US tariffs imposed on any advanced economy. On Monday in Israel, it is anticipated that annual inflation for August will decline to below the central bank’s target range of 1% to 3% for the first time in 14 months. This may influence the monetary authority to lower rates during its upcoming meeting on September 29. On Tuesday, Angola’s central bank is poised to potentially reduce its key rate — currently standing at 19.5% — in a bid to bolster the economy, given that inflation is anticipated to keep declining. A day later, Ghana is anticipated to lower its benchmark rate to 23% from 25% as inflation shows signs of easing. Governor Johnson Asiama stated in July that officials would probably reduce the rate further if disinflation persists.
On Thursday in South Africa, policymakers are set to maintain the interest rate at 7% in an effort to control inflation, which is anticipated to rise to 3.6% in August, up from 3.5% in the previous month. The central bank stated in July that it now favors inflation to stabilize at the lower end of its 3% to 6% target range. Eswatini, with its currency pegged to South Africa’s rand, is likely to align with the actions of the Reserve Bank.
On Monday, GDP-proxy data in Brazil is expected to reveal a decline in activity as the region’s leading economy approaches the latter half of 2025. Observers of Brazil will be eager on Tuesday to examine the postponed unemployment report for July. Despite the country’s tight labor market, analysts predict that the jobless rate will reach a record low of 5.7%. Among Andean economies, analysts anticipate a rebound in demand, as evidenced by Colombia’s retail sales, manufacturing, industrial production, and July GDP-proxy data. Peru also reports monthly output figures, indicating that the economy is operating below its potential and falling short of policymakers’ expectations. On Wednesday, the Banco Central do Brasil is expected to maintain its borrowing costs at a 19-year high of 15% for the second consecutive meeting. Consumer prices and inflation expectations have started to stabilize, and growth is decelerating; however, the majority of analysts do not anticipate any policy easing until 2026.
In Argentina, President Javier Milei is encountering significant challenges in maintaining the momentum of his economic program following a disappointing performance in the Buenos Aires provincial elections. Analysts have been revising their 2025 growth forecasts downward in anticipation of the April-June output data set to be released this week, which is expected to show little change from the previous quarter. Reports concerning trade, budget balance, and second-quarter unemployment are also forthcoming.
