Three European Central Banks Cut Interest Rates Successively Within 24 Hours, Highlighting Tariff Impact Amid Policy Shift

Within just 24 hours, three European central banks cut interest rates in succession, underscoring that central bank officials are attempting to address the impact of US President Trump's trade policies.

The Riksbank of Sweden and the Swiss National Bank announced interest rate cuts of 25 basis points on Wednesday and Thursday, respectively, despite their officials claiming in March this year that they had largely completed their easing cycles.

The Norges Bank of Norway also announced on Thursday a 25 basis point interest rate cut, surprising economists.

A total of 18 central banks worldwide are scheduled to announce their latest monetary policy decisions this week. Against the backdrop of most global central banks remaining on the sidelines, the easing moves by some European central banks stand out.

The US Fed, the Bank of Japan, and the Bank of England have all chosen to stand pat, as have policymakers in Pakistan, Turkey, and Chile.

All this is happening on the eve of a sensitive juncture, as the Trump administration in the US may reintroduce so-called reciprocal tariffs on July 9.

In April this year, Trump introduced the so-called reciprocal tariffs, imposing tariffs on nearly all trading partners, with specific rates varying according to each country's trade deficit with the US. Trump subsequently temporarily lowered the reciprocal tariffs uniformly to 10%, with the grace period set to expire on July 8.

Amidst the ongoing uncertainty of the Russia-Ukraine conflict and the potential for US military action against Iran, global policymakers have become more cautious, with many central banks reluctant to make hasty moves, either out of concern or due to a lack of conditions.

Analysts said, "The differences in the impact of tariffs and the labor market conditions in various countries explain why the Bank of England and the US Fed are moving more slowly on interest rate cuts. Currently, the situation in Iran has become a new variable. For the US, which is rich in shale oil, rising oil prices push up inflation but may not necessarily harm GDP growth, making it more difficult for the US Fed to cut interest rates. For Europe, which relies on imported oil, rising inflation coupled with weak economic growth provides a rationale for interest rate cuts."

Although the reasons for interest rate cuts in Sweden, Norway, and Switzerland vary, they are all related to inflation.

In Switzerland, the CPI fell 0.1% YoY in May. The latest central bank forecast released on Thursday showed that inflation would average only 0.2% this year. This is mainly because the Swiss franc, a safe-haven currency, has continued to appreciate against the US dollar and the euro since Trump took office.

In Sweden, inflation has pulled back after a brief spike earlier this year, and the country's economic recovery, which had initially shown signs of taking off, has fizzled out again. Riksbank Governor Erik Thedeen said on Wednesday that this provides room for more stimulus measures.

Since the beginning of the year, the Swedish krona has been the best-performing currency among the Group of Ten (G10) currencies, appreciating by 15% against the US dollar, effectively reducing the risk of imported inflation.

In Norway, inflation has been more persistent over the past year, partly due to the weakening of the Norwegian krone.

Despite this, Norway's core CPI was up 2.8% YoY in May, holding steady at the lowest level this year. The Norwegian central bank currently forecasts that the overall inflation rate will fall to 2.2% next year, lower than the 2.7% expected in March; the inflation rate for this year is expected to remain at 3%.

In addition, the consensus among the three central banks is that they are all likely to cut interest rates again.