As we approach the end of the week, what’s the score from central bank meetings this week?
There was no move from Australia, and if anything, the Reserve Bank is more hawkish. However, that's a stance because it is increasingly worried that the weakening in consumer demand will tank the wider economy.
But Sweden this week became the second major central bank to cut rates, joining the Swiss National Bank, while the Bank of England moved closer to a trim in the third quarter.
On Thursday, the Bank of England kept interest rates on hold at 5.25%, despite growing evidence that inflation across the UK is under control.
The Bank of England, in leaving rates on hold, stated that its restrictive monetary policy was taming inflation, with indicators “moving in the right direction.” However, the bank’s post-meeting statement noted that indicators “remain elevated,” and upside risks remain.
Governor Andrew Bailey warned that a June rate cut was not a done deal. There has been a lot of talk about a rate cut emerging from next month’s meeting. Bailey’s caution suggests that a cut could be pushed back closer to the September quarter and closer to when the UK general election is expected.
Members of the central bank’s Monetary Policy Committee voted 7-2 to maintain rates at their current levels, with the latter favoring a cut. In its prior meeting, only one member voted to reduce rates.
Meanwhile, Sweden cut interest rates on Wednesday and underlined the divergence between European central banks' policymaking and the Fed's. Sweden's central bank cut its key interest rate to 3.75% from 4.00%, as expected, and said it was likely to cut the rate two more times in the second half of the year if the outlook for inflation still holds.
Eight rate rises have seen Sweden fall back to 2.3% (it was more than 8% a year ago), close to the Riksbank's 2% target after peaking at over 10%. The Riksbank is the second of the major G10 central banks to ease, with the Swiss National Bank moving in March.
Now attention turns to the European Central Bank, which is widely expected to cut rates next month.
