Swiss National Bank cuts interest rates to stabilize Swiss franc.
European Central Bank signals further rate cuts to address weak eurozone growth.
Global impact prompts Canada, Brazil, and others to adjust monetary policies.
The return of Donald Trump to the White House has forced European central banks into action, with unexpected interest rate cuts aimed at shielding their economies from potential trade disruptions and currency instability.
The Swiss National Bank (SNB) initiated a surprise half-point rate reduction, dropping rates to 0.5%, the lowest since September 2022. The European Central Bank (ECB) followed suit, lowering its key rate to a 1.5-year low and indicating further reductions are on the horizon.
Concerns over the stability of the Swiss franc have prompted the SNB to take drastic measures in Switzerland. The bank’s vice president, Antoine Martin, emphasized that external risks, particularly from Trump’s potential policies, threaten Switzerland’s economy significantly.
The SNB has pledged to stabilize the franc, including the possibility of intervening in currency markets or reintroducing negative interest rates.
Similarly, the ECB faces challenges as weak economic growth and persistent low inflation hinder the eurozone’s recovery. ECB President Christine Lagarde outlined that the central bank is shifting away from restrictive monetary policies, signaling more rate cuts into 2025.
The ECB’s recent projections show a reduction in eurozone growth expectations for 2025, now at just 1.1%, down from 1.3%. Additionally, inflation remains stubbornly above the target, raising concerns that the region’s economy may struggle to regain momentum.
These moves by European central banks reflect broader global concerns. Other countries have also adjusted their monetary policies in anticipation of Trump’s return.
Canada, for example, has already slashed rates by 50 basis points, while Brazil took a different route, raising its rates by 100 basis points to stabilize its currency. Meanwhile, the Federal Reserve in the United States is also expected to follow with a rate cut.
As global policymakers act swiftly, it remains clear that Trump’s return to the presidency has far-reaching effects on monetary policies worldwide as central banks brace for the potential fallout of his trade and currency policies.