The return of Donald Trump to the White House in 2025 has significant implications for the global economy. Central banks are cautiously adapting their strategies to the changing global financial landscape.
Fed Freezes Rate Cuts
The Federal Reserve is not hastening to lower rates further. December saw a quarter-point reduction, but policy is currently on hold. Projections for 2025 suggest only an additional half-percentage point cut, as inflation remains above the 2% target. Fed Chair Jerome Powell maintains that current policy is sufficiently tight to control prices, although Trump's preference for low rates and booming stocks might create friction with the Fed's approach.
Eurozone and Japan Opt for Caution
The European Central Bank is cautiously cutting rates to combat slow growth. Its policy aims for a deposit rate of 2% by mid-year, reducing rates predictably by quarter points. In Japan, Bank of Japan Governor Kazuo Ueda faces a tough decision as inflation exceeds the 2% target for over two years.
Strategies of BOE and Bank of Canada
The Bank of England under Governor Andrew Bailey is sticking to a 'once-a-quarter' rate cut strategy despite domestic inflation. Meanwhile, the Bank of Canada focuses on stabilization after two major cuts in 2024, considering economic instability and U.S. tariffs on Canadian goods.
Central banks' actions in 2025 reflect the complex international economic environment. Trump's return demands global leaders adapt to changing conditions, striving for stability across various economies.
