Fed Will Keep Trump Waiting Amid a Wave of Global Rate Cuts

Donald Trump is struggling to get the Federal Reserve to cut interest rates, but policymakers around the world won’t need so much convincing.

Rhee Chang-yong Photo by Woohae Cho /Bloomberg

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(Bloomberg) — Donald Trump is struggling to get the Federal Reserve to cut interest rates, but policymakers around the world won’t need so much convincing.

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The US president’s tariff onslaught is likely to force further measured easing in coming months by most of the 23 central banks featured in this quarterly guide on the global monetary outlook, according to Bloomberg Economics.

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Its aggregate measure of advanced-economy rates will drop by more than 70 basis points this year, while a similar gauge for borrowing costs throughout the wider world is projected to fall by even more.

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The broad direction of travel for policy reflects the view among many monetary officials that Trump’s attempt to repatriate manufacturing and rewire commerce, if enduring, may be more of a danger to growth rather than posing a threat to consumer prices threat.

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“On inflation, cooling demand and falling energy prices point to a continued decline, albeit with variation across countries,” the International Monetary Fund’s No. 2 official, Gita Gopinath, said last week after a meeting of Group of 20 finance chiefs. “Downside risks continue to dominate the outlook and uncertainty remains high.” 

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For the US, worries about the consumer-price fallout from a tariff-induced jack-up in import costs may stoke ongoing worries at the Fed. BE predicts its policymakers will resist Trump’s pressure to reduce rates until circumstances finally allow a single quarter-point move in the fourth quarter.

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Peers in the euro zone, UK and Canada are all seen delivering two more cuts of that size this year. Among few exceptions to the easing push are Japan, which may raise once more, while Brazil probably stays on hold. 

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What Bloomberg Economics Says…

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“For the US, the impact of tariffs is complex. Higher import prices threaten rising inflation and falling growth. We expect that tension to keep the Fed from lowering rates till late 2025 — despite Trump’s calls for easy money. For the rest of the world, the impact is straightforward. More tariffs mean weaker growth, lower inflation, and so more cuts.”

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—Tom Orlik, global chief economist

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A lot of what happens in coming months will depend on whatever trade deals emerge, alongside Trump’s capacity to surprise, testing investors and forecasters alike. His actions toward the Fed, for example, are just one potential source of jolts to financial markets that could impact rate-setting.

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Given that proviso, here are BE’s best guesses for how monetary policy will pan out in the rest of 2025 across 90% of the global economy.

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GROUP OF SEVEN

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US Federal Reserve

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In the US, the short-term monetary policy debate has narrowed in recent weeks, focusing almost exclusively around how much tariffs will drive inflation.

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Two officials — Fed governors Christopher Waller and Michelle Bowman — have said they believe the hit to prices will be temporary, and so suggest a rate cut might be appropriate when policymakers gather July 29-30 in Washington. The rest of their colleagues are — to varying degrees — more cautious, worried by the risk of a persistent impact on inflation. Seven of the 19 expect no rate cuts at all this year.

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Yet so far, inflation data has been mixed. June consumer prices showed a long-awaited pass-through of tariffs for some goods, but the impact was still modest, offering something to support officials on all sides of the debate. Barring a surprise, it looks likely that policymakers will hold rates again this month but may cut at their mid-September meeting.

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In the meantime, Trump’s demands for lower rates and personal attacks on Chair Jerome Powell have entered a new, more aggressive phase, all while the White House begins evaluating candidates to succeed Powell, whose term as chair expires in May. Trump has pledged to pick someone who will cut rates, raising the prospect that the new chair will lack credibility with investors and other Fed officials from day one.

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What Bloomberg Economics Says:

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“Even though inflation prints had been surprisingly soft in 1H 2025, Fed officials continue to be uneasy about tariff-driven price pressures. With activity data solid, the FOMC also sees no urgency to cut rates and prefers to wait to see more inflation prints data over the summer. As a result, we expect just one Fed rate cut this year—likely in 4Q — less than the almost two cuts priced in by markets.”

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—Anna Wong

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Fed Right to Stay Pat On Rates According to Taylor Rule

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European Central Bank

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The European Central Bank is relatively comfortable with the results of its inflation-fighting efforts. Prices are now rising at the pace it targets and rates are at that same level. Most say the ECB is well placed to handle whatever challenges may arise — most likely on trade as Europe and the US look to hash out a final deal that would avoid the worst of Trump’s tariff threats.

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Among the biggest worries is that the euro zone’s lackluster economy makes the undershoot in inflation that ECB economists predict for 2026 more permanent. A worsening of such fears would favor further monetary easing, though opponents fret about the inflationary power of higher public spending on defense and infrastructure.

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What Bloomberg Economics Says:

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“The rise in US tariffs on exports from the EU, especially the levies on pharmaceutical goods threated by Trump, will have a dampening effect on the euro-area economy and create another disinflationary impulse. The ECB will probably respond by lowering rates again by 25 basis points in September and by the same amount in December, bringing the deposit rate to 1.50%. That should mark the end of the cycle.”

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—David Powell

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Bank of Japan

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Bank of Japan Governor Kazuo Ueda is broadly expected to keep his wait-and-see stance this quarter before raising the benchmark rate in later months. 

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Ueda has flagged “extremely” high uncertainty stemming from Trump’s tariff measures, and has made it clear that he wants to confirm their economic impacts in hard data, not just through anecdotal evidence. 

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The results of the upper house election on Sunday give another reason for the BOJ to pause for now, as traders digest implications for the economy and financial markets. With inflation remaining elevated, Prime Minister Shigeru Ishiba’s minority government has struggled to garner support. 

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With another rate hike widely expected to take place in the fourth quarter or early 2026, observers will be closely watching signs from the BOJ on its rate path and how clouds hanging over Japan’s economy could be cleared.      

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What Bloomberg Economics Says:

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“We’ve pushed our BOJ rate hike call to October from July. The political and market backdrop is proving less conducive to paring stimulus than we expected. Inflation still looks set to stay well above 2%, supported by wage gains and rising price expectations. But stalled US-Japan trade talks and surging JGB yields — fanned by fiscal concerns as the political debate turns to budget policy to battle the cost of living crunch — have created too much uncertainty for the BOJ to act now.”

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—Taro Kimura

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Bank of England

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The Bank of England is expected to stick to its once-a-quarter pace to rate cuts next month after signs that the UK jobs market is rapidly deteriorating.

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Governor Andrew Bailey has pointed to data showing a plunge in employment after businesses were hit in April by a rise in payroll taxes and another hike in the minimum wage. Cooling services inflation and more downbeat growth indicators after the bumper start to the year have also increased the odds of a quarter-point reduction in borrowing costs when the Monetary Policy Committee meets on Aug. 7. It would be the fifth cut since the BOE started lowering rates a year earlier.

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What Bloomberg Economics Says:

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“The Bank of England is caught between a rock and a hard place. Inflation is above 3% and is set to remain there until the spring of 2026. At the same, the economy is weak and the jobs market is softening. The central bank will likely respond by easing cautiously. We see cuts in August and November this year with a final move in February 2026.”

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—Ana Andrade & Dan Hanson

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Bank of Canada

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The Bank of Canada is expected to hold its policy rate at 2.75% for a third consecutive meeting on July 30, as officials weigh stickier-than-expected core inflation against damage from the trade war. Employment data surprised to the upside in June, suggesting that while some sectors dependent on US demand are feeling the impact of tariffs, the broader job market isn’t rapidly deteriorating.

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There are also question marks about fiscal policy, as Prime Minister Mark Carney has pledged to boost defense and infrastructure spending, while asking the government and public service to trim expenditures. In April, the bank opted to forgo point economic forecasts amid the mounting trade uncertainty — it’s unclear whether policymakers led by Governor Tiff Macklem will resume publishing an inflation and growth outlook in July.

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What Bloomberg Economics Says:

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“The consequences of trade tensions should become evident as 2Q and 3Q GDP data show economic activity slowing through mid-year. The labor market is likely to resume cooling as business expansion plans are delayed. The Bank of Canada has held the overnight rate steady near neutral, but we think growth concerns will dominate inflation risks in the second half. We expect the Governing Council to lower its rate target by 25 basis points in both 3Q and 4Q, before an extended pause.”

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—Stuart Paul

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BRICS CENTRAL BANKS

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People’s Bank of China

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The PBOC recently signaled it’s not in a rush to ease monetary policy again, after cutting rates and the amount of cash banks must hold in reserves in early May to cushion the impact of higher US tariffs. China posted solid economic growth in the second quarter, thanks to front-loaded export orders and government subsidies for consumers.

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But the economy is still suffering from deflation and weak consumer confidence, while exports are anticipated to slow amid tariff uncertainty. Economists expect the PBOC to deliver modest cuts to the policy rate and banks’ reserve requirement ratio in the fourth quarter to counter a slowdown in growth. The yuan’s stability will likely provide room for easing.

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What Bloomberg Economics Says:

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“The PBOC cut the policy rate by 10 basis points to 1.4% and lowered the reserve requirement ratio by 50 basis points in May — bringing the effective RRR to 6.2% from 6.6%. Policymakers are committed to boosting sentiment and growth facing the trade headwinds. We expect further 20-basis-point reductions in the policy rate and additional 50-basis-point cuts to the RRR by year end. The central bank may take the next action at late of the third quarter.”

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—David Qu 

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Reserve Bank of India

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The Reserve Bank of India’s June monetary policy review and liquidity moves puzzled the bond market. The central bank cut the repo rate by 50 basis points to 5.5%, shifted its stance to ‘neutral’ from ‘accommodative,’ and reduced the cash reserve ratio by 100 basis points effective September. It later began draining excess liquidity to correct distortions in short-term rates, pushing bond yields higher.

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The market reaction led Governor Sanjay Malhotra to clarify in interviews that rates could still fall if inflation drops below the RBI’s 3.7% forecast or if growth slows more than the projected 6.5% for the fiscal year ending in March. Most analysts don’t expect a cut in the August 6 review, but softer inflation has led many to anticipate at least one more reduction later in the year, possibly in October or December.

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What Bloomberg Economics Says:

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“The RBI’s hawkish shift in June to neutral from accommodative raises the bar for further easing. A record-low rate gap with the US also means the RBI will wait for the Fed to move first. Our base case is for a hold in August. Still, we see inflation coming in way below the RBI’s June forecast, suggesting it is not done easing. We expect 50 bps of cuts in 4Q25.”

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—Abhishek Gupta

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Central Bank of Brazil

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Brazil’s central bankers raised the benchmark rate to a two-decade high of 15% in June, while signaling that their tightening campaign had likely run its course. Economists expect the bank to start easing again next year as the economy cools under the impact of borrowing costs that are among the highest anywhere.

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A hot jobs market and a fiscal deficit equivalent to more than 7% of gross domestic product have complicated the bank’s inflation fight. Investors fear that President Luiz Inacio Lula da Silva will ramp up spending ahead of next year’s reelection fight, which would make policymakers’ job even harder. The bank is also contending with Trump’s threat to impose 50% tariffs on all goods from Brazil.

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What Bloomberg Economics Says:

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“Brazil’s policy rate stands at 15%, its highest since 2006, and the central bank signaled in June it had no plans to adjust it soon. The wildcard is Trump’s proposed 50% tariff on Brazilian exports, announced July 9. If a deal is reached, we expect rates to hold through 2025, with cuts in early 2026. But if tariffs come into effect and Brazil retaliates, the drag on growth could push the BCB to cut rates earlier,—potentially at the cost of inflation topping the target for another year.”

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—Adriana Dupita

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Bank of Russia

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The Bank of Russia has signaled it’s likely to cut the key rate further when policymakers meet on Friday, after they reduced it by 100 basis points from a record-high 21% in June.

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Still, Governor Elvira Nabiullina is cautioning that proinflationary risks remain and that if price growth stops easing sustainably or begins to accelerate again, the bank may pause rate cuts or even reverse them in the months ahead in order to reach the 4% inflation target next year.

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South African Reserve Bank

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After resuming its rate-cutting cycle in May, the South African Reserve Bank is set to extend it and lower borrowing costs by 25 basis-points to 7% this quarter because of benign inflation. What’s unclear is whether the cut will come this month or at the September meeting.

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Officials at the central bank are expected to remain cautious in anticipation of Trump’s trade tariffs that are due to kick in on Aug. 1, with a 30% levy imposed on South African imports.

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Governor Lesetja Kganyago warned that the uncertainty over tariffs is making policy making very difficult.

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“The big thing about the tariffs is that they would impact on economic activity,” Kganyago said. “What you will face is that you might end up with inflation yourself.”

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What Bloomberg Economics Says:

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“The SARB will likely cut rates at least once in 2H25 from the current 7.25%, as inflation runs cooler than expected. Price growth should pick up but still hover near the lower end of the 3–6% target from June, then rise above 4% in 4Q25 and stay there through 2026. But with the bank aiming to lower its target midpoint to 3%, easing will be modest. This cautious approach will keep inflation anchored at current levels.”

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—Yvonne Mhango

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OTHER G-20 CENTRAL BANKS

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Banco de Mexico

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Mexico’s central bank signaled that it will probably slow the pace of monetary easing after cutting its key rate to 8% in June.

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The central bank lowered it by half a percentage point at each of the last four meetings as the growth outlook soured amid uncertainty over Trump’s tariffs. However, with inflation still above target, economists forecast that the bank will pause rate reductions before the end of the year. 

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What Bloomberg Economics Says:

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“With monetary conditions still tight and their forecasts showing slower inflation and increasing economic slack this year and next, policymakers are likely to continue cutting rates. A weak dollar and expectations for lower US rates support the outlook. We see Banxico moderating the easing pace and cutting interest rates by 25 basis points in each meeting in August, September, November and December.”

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—Felipe Hernandez

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Bank Indonesia

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Bank Indonesia signaled more easing is on the way after a much-improved trade agreement with the US removed a key source of uncertainty for policymakers. BI surprised with a policy rate cut this month, just hours after Trump agreed to lower Indonesia’s tariff rate to 19% from 32%, giving it one of the lowest rates in the region.

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The rupiah and other Indonesian assets will likely rally thanks to the trade deal, while inflation is seen to cool this year, BI Governor Perry Warjiyo said. That should allow policymakers room to slash borrowing costs in a bid to revive the sluggish consumption and bank lending that threatens to drag down growth in Southeast Asia’s largest economy.

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What Bloomberg Economics Says:

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“Bank Indonesia is looking for opportunities to cut rates more aggressively to support growth. It has eased by 75 basis points in total this year, increasing the pace after each of its 25 basis-point moves. In July, it signaled a willingness to cut by a heftier 50 basis-point increment going forward, as economic dynamics warrant. Rupiah stability will likely remain key and this can’t be taken for granted as the impact of US tariffs could weigh more heavily on markets in the second half.”

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—Tamara Henderson

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Central Bank of Turkey 

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Turkey’s central bank is expected to resume its rate cuts as early as next week, months after political turbulence over the jailing of President Recep Tayyip Erdogan’s top rival in March diverted policymakers from their cutting cycle. Analysts however are finding it hard to gauge the size of the first cut since March. 

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An unexpected tax increase on lira-denominated deposit and funds by the finance ministry as well as Governor Fatih Karahan’s hawkish comments to investors in London last week are prompting some to anticipate a more cautious move, while others say seasonal factors will allow the bank to deliver a more sizable cut. Inflation slowed to 35.1% in June, with officials targeting 24% at end of year.

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What Bloomberg Economics Says:

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“We expect the CBRT to resume rate cuts at its July meeting amid an outlook of easing inflation and slower growth. We see the pace of cuts remaining muted, however, given the slow accumulation of reserves, ongoing slide in the lira, and inflationary threats from fiscal policies. The key policy lever will likely reach 41% by end of the third quarter, from 46% currently.”

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—Selva Bahar Baziki

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Central Bank of Nigeria

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Governor Olayemi Cardoso is likely to hold rates at 27.5% for at least one more meeting when his monetary policy committee delivers its next decision on July 22, as officials wait for more clarity on inflation.

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Price pressures eased again last month, but the data series was rebased for the first time in 16 years in January, complicating their read on the underlying trend.

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Import prices have been helped by the stability of the naira, despite uncertainty from US trade tariffs which softened the price for oil, Nigeria’s main source of dollar earnings. But policymakers must also monitor flood risks in key farming areas, which could elevate food prices.

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What Bloomberg Economics Says:

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“Nigeria is likely to begin cutting rates in September from the current level of 27.5%, once there is clear evidence of a sustained slowdown in inflation under a new price gauge. A stronger naira and the start of the harvest season in September will likely support the disinflationary trend. We expect annual inflation to slip below 20% in the third quarter and ease further to the mid-teens by year end, creating room for a gradual policy-loosening cycle.”

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—Yvonne Mhango

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Bank of Korea

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The Bank of Korea remains on an easing path to support growth in a sputtering economy threatened by Trump’s trade tariffs. The difficulty lies in finding the right timing to lower rates again as the central bank tries to strike a balance between stimulus and financial stability.

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Governor Rhee Chang Yong has said future rate cuts will depend on the risks from US trade policy and an overheating housing market that is fueling household debt. The BOK also needs to take into account the impact of a 31.8 trillion won ($23.3 billion) supplementary budget put together by the new government of President Lee Jae Myung.

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Still, the across-the-board US tariffs and targeted duties on key sectors such as autos and steel remain the largest clouds casting a shadow on the nation’s trade-dependent economy.

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What Bloomberg Economics Says:

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“The BOK is weighing further rate cuts to bolster soft domestic demand and counter rising risks from US tariffs. Still, it’s likely to move cautiously. Why? It’s worried about financial stability risks stemming from the housing boom in the Seoul area. We expect the BOK to lower its policy rate to 2% by year-end through two additional 25-basis point cuts — starting as early as August — conditional on signs of stabilization in the housing market.”

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—Hyosung Kwon

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Reserve Bank of Australia

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The RBA shocked investors and economists by keeping rates on hold in July with Governor Michele Bullock signaling a cautious approach to further cuts as policymakers await data on inflation.

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Economists and financial markets are predicting the next move will be in August if second-quarter inflation figures later this month show price pressures are still cooling.

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The biggest uncertainty at the moment is the fallout on Australia’s export-driven economy from Trump’s tariffs. The RBA’s assessment so far is that the first round effects of US levies on Australian goods are relatively minor and while it’s still early, the worst predictions on trade haven’t yet come to pass.

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What Bloomberg Economics Says:

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“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. Our base case is for additional 25 basis-point cuts in August and November. We see further rate cuts in 2026, taking the cash rate to 2.5%, below the RBA’s downwardly-revised neutral cash rate estimate.”

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—James McIntyre

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Central Bank of Argentina

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Under its $20 billion deal with the International Monetary Fund signed in April, Argentina committed to tightly curbing money supply growth to bring down inflation. It also ditched many of its strict currency controls, and adopted a moving exchange rate band for the peso. 

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Bank interest rates jumped well above expected inflation, choking credit growth and leading to rising loan defaults. Ahead of October elections, the government of Javier Milei will seek to keep the peso strong without snuffing out a rebound in economic activity. 

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What Bloomberg Economics Says: 

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“The BCRA’s focus on monetary aggregates means interest rates are endogenous—driven by market demand and supply for money—and thus more volatile. We expect these market-based rates to stay elevated in the coming months, with some potential relief after the October midterm elections if foreign investment flows pick up.”

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—Adriana Dupita

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G-10 CURRENCIES AND EAST EUROPE ECONOMIES

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Swiss National Bank

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The SNB could soon become the world’s first central bank to take rates back into negative territory. With a strong franc weighing on prices, policymakers pivoted last month from having finished easing to delivering another cut, bringing their benchmark to zero. Almost a third of economists now expect a move to -0.25% At their next scheduled meeting on Sept. 25.

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The franc’s gains are driven by dollar weakness, so officials will have one eye on any moves in Trump’s trade war and another on the inflation rate. It recently ticked up to 0.1%, but still threatens to undercut the SNB’s 0-2% target. President Martin Schlegel has stated that the bar for a return to negative rates is higher than it would be for a normal cut, but global markets may force his hand.

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What Bloomberg Economics Says:

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“Despite a cut to zero, the SNB has failed to halt the franc’s appreciation, which remains up more than 9% 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. We view a 25 basis-point rate cut into negative territory as the most likely next step, potentially accompanied by opportunistic foreign-exchange interventions. In our view, the main risk to this scenario is a public backlash against the return of negative rates — rather than concerns around financial stability.”

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—Jean Dalbard

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Sveriges Riksbank

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Sweden’s central bank appears poised to cut borrowing costs again later this year to support a weak economy buffeted by unpredictable US tariff policies. Riksbank officials reduced their rate to a 2 1/2 year low of 2% in June and said there was “some probability” they could move again if growth remains muted and inflation expectations stay anchored.

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Swedish sentiment surveys and retail data have since suggested the outlook is bleak, while inflation was a touch faster than expected in June. Focus will be on the July consumer-price report due on Aug. 7 as a key input before the next Riksbank decision later in the month.

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What Bloomberg Economics Says:

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“The prospect of additional sectoral US tariffs on European goods will likely act as a further drag on Swedish growth, prompting more easing from the Riksbank. We now see the central bank cutting the policy rate to 1.75% in September, from 2% currently. 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.”

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—Selva Bahar Baziki

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Norges Bank

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After delivering its biggest surprise in years with a rate cut in June after an extended pause after reaching the peak of its hiking cycle, Norway’s central bank is expected to extend post-pandemic easing in September. Norges Bank has focused on lower-than-expected inflation outcomes in recent months, opting to follow peers in reducing restraint even though the energy-rich Norwegian economy has largely avoided fallout from high borrowing costs.

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With core inflation still hovering above 3%, officials led by Governor Ida Wolden Bache will likely remain cautious even after their change of course. A robust labor market and a recent surge in home prices suggests households may be able to sustain a further improvement in domestic demand even as uncertainty linked to US trade policies clouds the outlook for exports. The June rate path implies as many as two further cuts in 2025, with a terminal rate of about 3% before the end of 2028.

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Reserve Bank of New Zealand

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The RBNZ paused its easing cycle in July, holding rates steady for the first time in seven meetings to assess an uptick in inflation. Still, officials expect to resume rate cuts if price pressures abate as projected — reinstating an explicit easing bias.

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While inflation could test the top of the RBNZ’s 1-3% target band later this year, latest data point to a weakening economy that is likely to need more monetary support. Investors are pricing at least one further quarter-point cut in the cash rate this year to 3%, and some economists forecast it could drop as low as 2.5% by early 2026.

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What Bloomberg Economics Says:

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“The RBNZ’s concerns about elevated near-term inflation won’t last — persistent weak demand and a sluggish labor market will see the central bank resume easing. We expect rate cuts to resume at the August meeting. The RBNZ projects the OCR will fall to just above neutral. It will have to cut deeper. We see the RBNZ delivering an additional 75-basis-points of rate cuts by the first quarter of 2026, taking the official cash rate to 2.5% — 40 basis points below their estimate of neutral.”

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—James McIntyre

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National Bank of Poland

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Poland’s central bank Governor Adam Glapinski yet again wrong-footed markets by delivering a surprise rate cut in July. He said the reduction — the second this year — was just a “cautious adjustment” and not the start of an easing cycle.

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Yet with consumer-price increases set to slow in the coming months, more cuts are likely in store. Glapinski didn’t rule out another reduction later in the year if inflation recedes within the central bank’s tolerance range as staff forecasts currently show. What may give policymakers pause is a flare-up in trade tensions and continued loose budget spending, two factors that are very likely to persist.

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Czech National Bank

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The Czech central bank is likely to hold rates for some time, after a cycle of stop-and-go easing ended with two cuts this year. Investors have curbed bets on a further decline and forward prices show the market split between stable rates and one more reduction within 12 months.

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With sticky services inflation, policymakers see the soaring property market as a key future risk. Plans to boost the budget deficit due to defense spending may be another source of price pressures, according to Governor Ales Michl, who has pledged to maintain “very strict” policy.

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“All options are open, but at the moment it looks like rates will stay at the current level for some time,” he said after the last meeting.

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—With assistance from Scott Johnson (Economist), Jamie Rush (Economist), Alister Bull, Andrew Langley, Andrew Rosati, Anup Roy, Artyom Danielyan, Barbara Sladkowska, Bastian Benrath-Wright, Beril Akman, Charlie Duxbury, Christopher Condon, Claire Jiao, Harumi Ichikura, Heesu Lee, Isabella Ward, James Hirai, Matthew Bristow, Matthew Brockett, Manuela Tobias, Maya Averbuch, Monique Vanek, Nduka Orjinmo, Ntando Thukwana, Ott Ummelas, Peter Laca, Piotr Skolimowski, Swati Pandey, Thomas Hall, Tom Rees, Tony Halpin, Toru Fujioka, Yujing Liu and Yuko Takeo.

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