Global central banks expected to resume rate cuts amid tariffs

Global central banks are expected to resume the interest rate cut cycle as governments are confronting the impact of the United States’ tariffs.
The chance of the US Federal Reserve lowering borrowing costs in September by 25 basis points hit 89.1 percent, while only 10.9 percent of traders expected a hold, data from CME FedWatch showed.

The rate cut bets were boosted by the weaker-than-expected US payrolls data.

In the United Kingdom, the Bank of England is expected to cut interest rates this week but the likelihood of a fresh three-way split among policymakers underscores the conflicting risks posed by rising inflation and a weakening job market to Britain's economy.

The BoE's Monetary Policy Committee still appears divided between those who want aggressive action to offset the slowing job market, others who worry about persistent inflation pressure and a majority in the middle who favour gradual rate cuts.

But some analysts think the BoE might be approaching the end of its run of reducing borrowing costs.

Robert Wood and Elliott Jordan-Doak, economists at Pantheon Macroeconomics, predict a "one-and-done" cut next week and expect inflation to hold above the BoE's target of 2 percent through 2026 and 2027 - in contrast to the BoE's view that CPI will return to 2 percent early in 2027.

Australia's central bank is projected to announce a quarter-point cut as early as next week, Financial Review reported, citing economists and analysts.

Besides, the Australian consumer prices grew 2.1 percent year-on-year in the June quarter the slowest pace in over four years, rising the possibility of a rate cut by the Reserve Bank of Australia.

Last week, markets implied a near-100 percent chance the RBA will cut its 3.85 percent cash rate by a quarter point when it meets on August 12, and continue easing to 3.10 percent or lower by year-end.

STAFF REPORTER AND REUTERS