A different story
It’s a very different story across the Atlantic, where the first impact of tariffs has been felt on Europe’s export industry. Having rushed to ship products to the U.S. before tariffs took effect, they now face the prospect of a long wait for repeat orders. While central banks are still afraid that the trade war could disrupt global supply chains and add extra costs that would push inflation higher at some stage, right now, that’s a concern for another day.
“The economic recovery that began last year has lost momentum,” the Riksbank said on Wednesday, as it cut its key rate by a quarter-point to 2.0 percent.
“Following a strong first quarter, growth is likely to slow again and remain rather subdued over the remainder of the year,” the Swiss National Bank echoed Thursday morning, after taking its key rate down to zero from 0.25 percent.
In Norway, which had held out against cutting interest rates at all since the post-pandemic inflation surge, the central bank said the time had finally come to shift its stance. Norges Bank also said it will probably cut interest rates again in the course of the year.
The Bank of England, meanwhile, left its bank rate unchanged at 4.25 percent on Thursday, but it had already cut it in May, and Governor Andrew Bailey said in a statement that “Interest rates remain on a gradual downward path.” The European Central Bank also cut its key rate for an eighth time in the last year earlier in June, and analysts expect further cuts from both in the months to come (even if the ECB’s top brass isn’t so sure).
And as growth slows, inflation is now heading below where central bankers would like it to be, at least in the short term. The ECB sees it at 1.6 percent next year, before rebounding to its 2.0 percent target in 2027. In Switzerland, inflation has already turned negative on the year, at -0.1 percent in May.