Global interest rates the US skips the 2025 cutting cycle (for now)

Donald Trump stepped up his pressure on Jerome Powell this week, criticizing the Federal Reserve chair for not cutting interest rates. Reports said the US president was considering naming Powell's successor early in a bid to undermine the last year of the Fed chief's tenure.

On a global basis, the Federal Reserve has certainly become an outlier, as our chart of developed market monetary policies shows. Switzerland returned to a zero-interest rate regime this month, concerned about deflation and an overly strong franc. The European Central Bank loosened policy at the start of June, its eighth consecutive reduction. (Japan, as always, remains by far the biggest outlier -- tightening policy as inflation rises.)

The Fed's relative hawkishness especially stands out given how the Covid era of ultra-low rates -- and the subsequent rate-hiking cycle to tame inflation -- were so globally synchronized.

Powell, concerned about tariffs' effect on inflation, reaffirmed his "wait-and-see" policy this week. While not explicitly ruling out a rate cut next month, he noted that the labor market remained strong. (Fed policy makers unanimously voted to hold the key rate at 4.25%-4.5% this month.)

Still, Trump's threats to Powell -- or perhaps concerns about recent job data -- might be shifting the market's outlook. As our second chart shows, the CME's FedWatch Tool now places a 42% probability on the Fed's key rate being 75 basis points lower by the end of the year. Just a week earlier, that outcome was seen as only half as likely.

For more global context, we've added two more charts for the Nordic-5 central banks (which have hiked and cut almost in unison) and emerging markets (where Brazil and Russia have been the non-cutting outliers).

Our monetary policy dashboard offers an even broader look at interest rates and central banks.