Limited Cuts and New Shifts in Central Bank Policies

2025 is expected to witness limited global interest rate cuts, accompanied by significant shifts in
central bank policies due to economic and inflationary pressures.

Content

Impact of Trump Administration Policies on U.S. Inflation and Monetary Policy
Forecasts by Financial Institutions on Monetary Policies
Impact of Global Fiscal and Economic Policies
Conclusion

Impact of Trump Administration Policies on U.S. Inflation and Monetary Policy

The Trump administration’s policies are expected to significantly influence inflation rates in the U.S.,
putting pressure on the Federal Reserve’s ability to address economic challenges.
Projections indicate limited interest rate cuts, with final rates reaching higher levels than previously anticipated.
Meanwhile, major central banks like the Bank of England and the European Central Bank face similar challenges,
whereas the Bank of Japan appears to be the sole institution likely to continue raising interest rates.

Forecasts by Financial Institutions on Monetary Policies

Federal Reserve

Apollo Global Management: Expects interest rates to drop to around 4% by the end of 2025, at a slower pace than market expectations.
AXA Investment Managers: Predicts a temporary halt in rate cuts at 4.25%, with a resumption in the second half of 2026.
Bank of America: Anticipates two additional rate cuts in the first half of 2025, reducing global average rates from 5% to 4%.

European Central Bank (ECB) and Bank of England (BoE)

Capital Economics: Projects the ECB to lower rates to 1.5% by the end of 2025,
while the UK base rate could peak at 3.75% before gradually declining.
Deutsche Bank: Foresees European rates dropping to 1.5%, citing ongoing economic pressures and slow growth.

Bank of Japan (BoJ)

Invesco: The BoJ is an outlier, with expectations of raising rates to 1% by the end of 2025.
JPMorgan: Anticipates stricter monetary policies from the BoJ, driven by domestic factors such as wage growth.

Impact of Global Fiscal and Economic Policies

Reports highlight the influence of fiscal policy changes, such as U.S. tariffs and tax cuts, on monetary policy trajectories worldwide.
European economies may experience a weakening euro against the dollar as the ECB continues easing measures.
In China, policymakers are focusing on stabilizing growth amidst trade challenges with the U.S.

Conclusion

The year 2025 marks a turning point for global monetary policy, as central banks cautiously reduce interest rates.
While economic challenges persist, local and international strategies will determine the balance between supporting growth
and controlling inflation.
The Bank of Japan stands out with its continued tightening approach compared to other major central banks.

Limited Cuts and New Shifts in Central Bank Policies

Limited Cuts and New Shifts in Central Bank Policies

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