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Monetary Policy Divergence: A World of Cautious Central Banks

 

In March 2025, world central banks registered diverse monetary policy changes, being cautious not to react to economic uncertainties.

The Swiss National Bank cut its policy rate by 0.25 percentage points to 0.25%. The reduction is spearheaded by inflation within the SNB 0-2% target range and franc nervousness.

At the same time, the Bank of Canada reduced its overnight lending rate by 25 bps to 2.75%. The Federal Reserve (Fed) did not reduce interest rates at 4.50%, but is planning to reduce them twice this year. In the same vein, the Bank of England has not been as aggressive as some of its counterparts but will reduce rates by 25 bps next week.

On the other hand, the Bank of Japan is in a hiking cycle and just increased rates to 0.5%, which is a post-2008 global financial crisis level. On balance, the initial central bank meetings of 2025 reveal it will be a year that policymakers diverge and do their own thing as economic routes fork out

 

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