June has proven to be an interesting month for global central banks, with some initiating rate cuts to stimulate growth, whilst others are holding steady amidst persistent inflation or internal debates.
The notion that synchronized global monetary policy is a realistic goal seems firmly behind us.
ECB Cuts
The European Central Bank (ECB) led the charge with a deposit facility rate cut, emboldened by inflation settling near its 2% target and an improving, albeit gradual, economic recovery within the Eurozone.
Lower energy prices, coupled with slower wage growth and a stronger euro, have provided the ECB with the necessary leeway to ease monetary policy. The market anticipates further easing, with expectations of approximately 54 basis points in cuts by year-end.
This move has generally been well-received, although some analysts express concern that the ECB may be acting prematurely, potentially reigniting inflationary pressures down the line.
Holding Firm
Across the Atlantic, the U.S. Fed finds itself in a more precarious position. While rate cuts are widely expected by the end of 2025, the timing remains highly uncertain. Persistent inflation, stubbornly above target, coupled with looming trade tariffs, has created a significant policy dilemma.
Internal divisions within the Fed are intensifying, with some governors advocating for immediate rate cuts to mitigate the impact of tariffs and support economic growth, while others, including Chair Jerome Powell, emphasize the need for more concrete economic data before making any adjustments. President Trump’s vocal criticism of the Fed for not cutting rates more aggressively further complicates the situation, adding a layer of political pressure to an already challenging economic environment.
Also holding firm were the Bank of England (BOE), BOJ, and BOC.
The Bank of Canada (BOC) held after a series of cuts earlier in the year. The BOC cited signs of a slowing economy and the potential impact of U.S. tariffs on Canadian goods as reasons for maintaining the current rate.
The BOE cited similar concerns regarding economic slowdown and trade tensions. The Bank of Japan (BOJ) also held steady, focusing on supporting domestic economic activity and achieving its inflation target.
