Central Bank Rates Review

By Alun John, Naomi Rovnick, and Samuel Indyk

LONDON (Reuters) – The Bank of England concluded a significant year for central bank rate cuts by maintaining rates on Thursday, a day after the Federal Reserve took a cautious approach for 2025.

Seven of the world's ten major developed-market central banks reduced rates this year, with Australia and Norway holding steady, and Japan increasing rates.

1. Switzerland

The Swiss National Bank (SNB) unexpectedly cut rates by 50 basis points to 0.5%, the lowest since November 2022, marking its most significant reduction in nearly a decade. With annual inflation at 0.7%, the SNB remains vigilant about the Swiss franc's strength impacting exports and hinted at potential further cuts.

2. Canada

The Bank of Canada reduced rates by 50 basis points to 3.25%, its first consecutive half-point cuts since the COVID-19 pandemic. While inflation rose to 2%, concerns about the weak economy and potential U.S. tariffs led markets to anticipate another cut next month.

3. Sweden

Sweden's Riksbank cut rates by a quarter-point to 2.5%, indicating a slower easing pace after previous cuts. The central bank prefers a careful approach due to the delayed effects of monetary policy.

4. New Zealand

New Zealand faces recession, pushing for aggressive rate cuts. The Reserve Bank has already lowered rates by 125 basis points and could cut by another 50 next meeting in February.

5. Euro Zone

The ECB cut its deposit rate by 25 basis points to 3%, marking its fourth cut this year and leaving options open for further reductions.

6. United States

The Federal Reserve cut rates as expected, but Chairman Jerome Powell indicated that additional cuts will depend on progress against high inflation.

7. Britain

The Bank of England maintained its rate at 4.75% but showed divisions on the need for cuts amid slowing economic conditions, leading to a rally in UK government bond prices.

8. Norway

Norway's central bank held its policy rate steady at 4.5%, signaling an expectation to begin easing in March.

9. Australia

The Reserve Bank of Australia held rates at 4.35% but indicated a softer inflation outlook, raising the probability of a quarter-point cut next month.

10. Japan

The Bank of Japan, the only G10 central bank in a hiking cycle, kept rates unchanged but hinted at future adjustments after waiting for wage data to be released in Spring.