Central banks face divergent paths amid economic uncertainty: UBS

Published 21/07/2025, 14:06
© Reuters

Investing.com - Central banks around the world are navigating different stages of their interest rate cycles as they prepare for a series of policy meetings beginning this week, according to a UBS report released Monday.

The European Central Bank (ECB) will lead the sequence of meetings on Thursday, followed by the U.S. Federal Reserve, Bank of Japan, and Bank of England over the next two weeks.

Despite being at varying points in their respective rate cycles, all four major central banks face significant uncertainty in the policy environment.

UBS expects the ECB to pause after seven consecutive rate cuts, preferring to assess economic responses to previous moves and monitor tariff negotiations.

The Bank of Japan, which began hiking rates as others started cutting, likely has room for further increases but is expected to hold rates steady due to easing inflation and ongoing trade discussions with the U.S.

The Federal Reserve faces perhaps the most challenging decision as it weighs whether potential tariffs on U.S. imports will trigger more inflation or weaker growth.

Despite pressure from President Trump to cut rates, UBS anticipates the Fed will maintain current rates for now as economic data provides no clear direction.

The Bank of England, dealing with the familiar trade-off between persistent inflation and a slowing economy, has been more cautious than the ECB in its easing cycle.

With U.K. monetary policy still in restrictive territory and growth headwinds becoming more evident, UBS expects the Monetary Policy Committee to implement a rate cut in August, likely with another split vote.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.