Rate Decisions Show Divergent Paths Among Central Banks

In a week of global monetary policy announcements, central banks revealed contrasting monetary strategies. 

The U.S. Federal Reserve held its benchmark interest rate steady at 4.25%–4.5%, keeping it unchanged since December. However, policymakers still anticipate two rate cuts in 2025, despite trimming long-term projections to just four cuts through 2027. 

With inflation expected to remain around 3% and GDP growth forecast to slow to 1.4% next year, Fed officials are clearly balancing cautious optimism with economic headwinds.

Across the Atlantic, the Bank of England also held rates firm at 4.25%, as inflation proved stickier than anticipated. U.K. consumer prices rose 3.4% year-on-year in May, well above the 2.6% reading in March. Although April’s data was adjusted due to a reporting correction, the upward trend in prices is delaying any imminent rate easing. Analysts expect the BoE to wait for clearer signals before pivoting.

Meanwhile, Norway and Switzerland took more definitive action. Norges Bank reduced its policy rate by 25 basis points to 4.25%, citing a cooling inflation outlook. This marks the first rate cut since the pandemic’s onset. 

The Swiss National Bank went further, trimming rates by 25 basis points to 0%, as deflation pressures take hold — May saw a 0.1% year-on-year decline in consumer prices. With the Swiss franc remaining historically strong, the SNB’s move aims to prevent further downward price spirals.

What Does This Mean for Me?

The difference in central bank strategies says something the uneven global recovery. While some economies still battle inflation, others now confront the prospect of disinflation or stagnation — leaving policymakers to chart increasingly imbalanced paths.