36-hour Interest Rate Spree Heralds First 2025 US Rate Cut

The first U.S. interest rate cut since President Donald Trump began his second term is set to dominate financial headlines this week, kicking off a series of policy decisions that will shape the outlook for half of the world’s 10 most-traded currencies.

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The action starts with the Bank of Canada, followed by the Federal Reserve on Wednesday, the Bank of England on Thursday, and wrapping up with the Bank of Japan on Friday. Collectively, these decisions could adjust borrowing costs, signal future intentions for the final stretch of the year, or both.

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By week’s end, policy rates that directly influence nearly two-fifths of the global economy including four members of the Group of Seven will have been recalibrated or reaffirmed. At the center of it all: the Fed’s expected rate cut, a move long demanded by Trump’s White House.

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The tension between Trump’s persistent push for cheaper credit and Fed Chair Jerome Powell’s concern over tariff-driven inflation has been an ongoing storyline. But with labor market data softening, most economists now anticipate a 25-basis-point cut.

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The Bank of Canada and Norway’s central bank are also projected to trim rates by a quarter point, while the BOE and BOJ are likely to tread more cautiously. The BOE, which delivered a rare split decision in August, is expected to hold steady this time. Meanwhile, the BOJ is inching toward tighter policy but has signaled no imminent shift.

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Other major emerging-market central banks including those in Indonesia, Brazil, and South Africa are expected to stay on hold, watching global conditions unfold.

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Beyond rate decisions, investors will also digest a slew of data releases, from China’s monthly economic reports to inflation figures across Japan, the UK, and Israel, as well as a credit rating review for Italy.

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In the U.S., the Fed will make its decision after fresh insight into consumer spending. August retail sales are forecast to rise 0.3%, following stronger gains in June and July. Still, with job growth cooling and inflation pressures lingering, analysts are questioning how long consumer strength can continue.

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Weekly jobless claims on Thursday will also be watched closely to determine whether last week’s spike signals a deeper labor market slowdown or was simply a blip.

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North of the border, Canada’s inflation report is expected to show headline prices climbing to 2% year-over-year, while core measures hover near 3%. That likely won’t stop the Bank of Canada from cutting its overnight rate to 2.5%, given recent weak employment data and a second-quarter economic contraction.

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Even so, Canada’s easing campaign has yet to reignite housing demand. Upcoming reports on home sales and housing starts will provide the latest snapshot of a sector critical to the country’s outlook.

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Asia will be equally busy, with three central bank meetings capped by the BOJ’s decision. China kicks off Monday with a flood of August figures, including retail sales, industrial output, investment trends, and unemployment. These will show whether recent targeted support is helping counter July’s slowdown. Housing data will also be closely monitored for signs of how deep the property slump runs.

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India is expected to report a narrower trade deficit, while Pakistan’s central bank is likely to keep rates steady. Wednesday brings Japan’s trade balance and Singapore’s export numbers a key barometer for global electronics demand.

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Bank Indonesia also meets Wednesday amid political turbulence following Finance Minister Sri Mulyani Indrawati’s abrupt resignation. Despite the unrest, economists expect no policy change after two consecutive cuts.

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Later in the week, New Zealand’s GDP report and Australia’s jobs data will be pivotal for their respective central banks. By Friday, all eyes will be on Tokyo, where the BOJ is expected to stand pat. Investors will parse Governor Kazuo Ueda’s comments for clues on when rate hikes could resume as growth firms up and inflation remains elevated.

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Additional regional updates include trade data from New Zealand and Malaysia, balance-of-payments reports from Hong Kong, and China’s latest FX settlement flows.

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Europe, the Middle East, and Africa

In the UK, inflation data is due just before the BOE meeting. Headline CPI is forecast to hold at 3.8%, with services inflation showing some softening. The BOE itself projects a peak of 4% in September. Policymakers are expected to hold rates at 4%, though divisions may again surface as some members push for cuts.

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Attention will also turn to how the BOE handles its bond portfolio. After months of turmoil, officials may ease back on quantitative tightening, slowing the current £100 billion annual pace.

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Norway’s decision could be the trickiest in Europe. While earlier guidance pointed to another quarter-point cut, stubbornly high inflation and resilient business sentiment could sway policymakers toward waiting.

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Meanwhile, ECB watchers will focus on a two-day policy conference beginning Wednesday, where President Christine Lagarde and others may offer clues on the eurozone outlook. Data highlights include trade figures, industrial production, and Germany’s ZEW confidence survey.

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Several credit rating decisions for euro-area nations, including Italy from Fitch, Greece from Moody’s, and France from DBRS Morningstar.

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Elsewhere, Switzerland’s export numbers will be closely watched as the country negotiates relief from steep U.S. tariffs, while Israel’s inflation rate is expected to fall below the central bank’s target band for the first time in over a year, opening the door to a possible rate cut later this month.

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