Central banks around the world are at different stages in their interest rate cycles ahead of a series of policy meetings starting this week, according to a UBS report released on Monday.
The European Central Bank (ECB) will lead the series of meetings on Thursday, followed by the U.S. Federal Reserve (Fed), the Bank of Japan (BoJ), and the Bank of England (BoE) over the next two weeks.
Despite being at different stages of their rate cycles, all four major central banks are grappling with significant policy uncertainty.
UBS expects the ECB to pause its seven-year rate cut cycle to assess the impact on the economy and monitor tariff negotiations.
The Bank of Japan, which began raising rates as others began cutting, likely has room for further hikes. However, it is expected to keep rates on hold due to subdued inflation and ongoing trade talks with the U.S.
The Fed is expected to face its most challenging decision yet when it weighs whether tariffs on imports will lead to higher inflation or weaker growth.
Despite President Trump’s push for a rate cut, UBS expects the Fed to keep rates on hold for now as economic data has yet to show a clear direction.
Meanwhile, the Bank of England, which has remained cautious compared to the ECB, is still faced with a dilemma between continued inflation and slowing economic growth.
With the UK’s monetary policy still tight and pressure on growth becoming more evident, UBS expects the Monetary Policy Committee to cut rates in August, most likely in another lopsided vote.
