The Federal Reserve has maintained interest rates, leading to varied reactions in the markets. The US dollar is stronger against the euro and pound, while it has weakened against the yen.
The Bank of England also kept its rate steady at 4.5%, with one member advocating for a cut. The Monetary Policy Committee noted advances in disinflation but is cautious about persistent inflation, projecting CPI inflation to hit 3.75% by Q3 2025.
Swiss National Bank Decision
The Swiss National Bank cut its key rate by 25 basis points to 0.25%, responding to lower inflation. Despite revisions in inflation projections, underlying inflation pressures are expected to ease gradually.
Current projections for Swiss GDP growth remain at 1.0% to 1.5% for 2025. The central bank noted heightened uncertainty from trade and geopolitical risks, impacting future policy decisions.
In the US market, initial jobless claims and manufacturing data will be released soon. Stock futures indicate lower levels, while yields in the debt market have decreased.
Crude oil prices have increased slightly, whereas gold and Bitcoin have both declined.
Market Reactions To Rate Decisions
With the Federal Reserve choosing to hold rates, the immediate response in the currency market has been mixed. The US dollar has gained strength against the euro and the pound, yet it has lost ground to the yen. This reflects a divergence in market expectations regarding central bank policy between the US and Japan.
Similarly, the Bank of England opted to leave borrowing costs unchanged at 4.5%. One member of the Monetary Policy Committee favoured a reduction, an indication that discussions on easing policy are beginning to take shape. Inflationary pressures have softened to some extent, yet the committee remains cautious, anticipating that consumer prices will continue their gradual decline. Projections suggest CPI inflation will settle at 3.75% by the third quarter of next year, which keeps rate decisions finely balanced.
In Switzerland, the central bank took a different approach, delivering a rate cut of 25 basis points. Slowing inflation provided room for the adjustment, though policymakers remain mindful of potential underlying pressures. Their growth forecast for next year remains unchanged, but external risks—ranging from global trade uncertainties to geopolitical tensions—remain on the radar. Such factors will shape their next steps.
On the US economic front, upcoming data releases on jobless claims and manufacturing will provide further clarity on the strength of economic activity. Equity markets are showing signs of weakness in pre-market trading, while bond yields have come down, reflecting shifting expectations around future monetary policy.
In commodities, oil has edged higher, but gold and Bitcoin are both in decline. The moves in these asset classes suggest changing risk sentiment is already at play in response to recent central bank decisions.
