A U.S. Holiday and Many Central Bank Policy Reviews – Currency Thoughts
A U.S. Holiday and Many Central Bank Policy Reviews
June 19, 2025
In spite of the current U.S. govenment’s crusade against DEI, June 19 remains a federal holiday commemorating the end of slavery in 1865. Banks, the U.S. stock exchanges and non-essential federal offices are shut. In overnight trading abroad, the dollar rose 0.8% against the kiwi, 0.5% versus the Australian dollar, and 0.4% relative to the yen and peso but hardly moved on balance against other currencies. Stock markets had a difficult session in Asia and Europe, closing down by 2.0% in Hong Kong and Indonesia, 1.6% in Taiwan, 1.0% in Japan and 0.8% in China. Losses thus far in key Euroland bourses range from 0.5-0.9%, while the British FTSE is down by a lesser 0.3%. Ten-year sovereign debt yields have risen four basis points in France, three bps in Italy and Spain, and two bps in Germany and Great Britain, but the 10-year Japanese JGB yield extended its post-BOJ meeting slide by another four basis points to 1.41%. Continuing Middle Eastern hostilities sent the price of WTI oil up another 1.7%. Gold stumbled 0.7%, while Bitcoin stayed level.
The Swiss National Bank policy interest rate as expected was sliced 25 basis points to zero percent, its lowest level since September 2022 and down from a peak of 1.75% reached in June 2023 and maintained until an initial cut in March 2024. Swiss consumer price inflation turned negative (-0.1%) in May for the first time in 50 months, and monetary officials again cut their forecast future path of inflation projecting lower year-average rates of 0.2% this year, followed by 0.5% in 2026 and 0.7% in 2027. A released statement today asserts that “Without today’s rate cut, the forecast would have been lower.” The Swiss franc is considered overvalued and is at risk of becoming more so in these geopolitically tense times, so the statement also expresses a willingness “to be active in the foreign exchange market as necessary.”
The Bank of England‘s Bank Rate was left unchanged at 4.25% after a 6-3 vote by the Monetary Policy Committee with Dhingra, Ramsden, and Taylor dissenting in favor of a another 25-basis point cut. There have been four such reductions since August 2024, each aligned with the publication of the quarterly Monetary Policy Report. British CPI inflation printed at3.4% last month, above the 2% target, and is not projected resume a disinflationary trend until early next year. Labor market data are pointing to more slack, and the view of the committee majority favors continuing a gradual yet cautious withdrawal of monetary restraint.
In a move that had not been anticipated, the key interest rate at the Bank of Norway was sliced by 25 basis points to 4.25%. This was its first reduction since the peak of 4.50% was attained in December 2023. Today’s cut was the first since May 2020 when zero percent was imposed early in the pandemic. Although Norwegian inflation of 3.0% last month was above April’s reading and the target of 2%, a released statement from policymakers proclaims that “it is now appropriate to begin a cautious normalisation of the policy rate” in order to “pave the way for inflation to return to target without restricting the economy more than necessary.” At 4.25%, policy is still restrictive. One or two more small cuts are possible this year with a level of around 3.0% in mind by the end of next year.
Despite receding from 75.9% in May 2024 to 35.4% a year later, Turkish CPI inflation remains far above the Central Bank of Turkey‘s medium-term target of 5.0%. After lifting the bank’s reference interest rate by 350 basis points in April, officials as expected left such at 46.0% after a scheduled meeting today. Lira stability is deemed necessary to restoring sustainable price stability. A statement was released sums up the latest policy thinking as follows
The tight monetary stance will be maintained until price stability is achieved via a sustained decline in inflation. Accordingly, the policy rate will be determined in a way to ensure the tightness required by the projected disinflation path taking into account realized and expected inflation, and the underlying trend. The Committee will adjust the policy rate prudently on a meeting-by-meeting basis with a focus on the inflation outlook.
The Central Bank of Brazil’s Selic interest rate was increased by another 25 basis points to 15.0%, which represents its greatest elevation in a little more than a decade. The vote was unanimous, and the new rate is up from 10.5% as recently as last September. Brazilian CPI inflation of 5.3% last month and measures of expected inflation are each above target. A released statement from the monetary policy committee suggests a pause now but doesn’t rule out further hikes in the future: “the Committee foresees an interruption of the rate hiking cycle to examine its yet-to-be-seen cumulative impacts […] It will not hesitate to proceed with the rate hiking cycle if appropriate.”
The Central Bank of the Philippines’ policy interest rate was cut today by 25 basis points to 5.25%, a 30-month low. This move was the fifth quarter percentage point drop since last August. Consumer price inflation of 1.3% last month was at a 56-month low and under the central bank’s target of 2-4%. Projected consumer price inflation was revised downward to 1.6% this year, 3.4% in 2026 and 2.3% in 2027.
At the Central Bank of the Republic of China (Taiwan), the discount rate was left unchanged at 2.0%, its level since a 12.5 basis point hike at the March 2024 quarterly review. While Taiwanese CPI inflation of 1.53% last month was lower than the 2.0% target, external uncertainties and faster-than-expected growth so far this year argue for caution. Likewise, the Hong Kong Monetary Authority, which takes its interest rate cue from the Federal Reserve, left its key interest rate unchanged today at 4.75%.
In contrast to a low last year of 3.3% in May 2024, Moldovan consumer price inflation has been 7.0% or higher for the last six reported months, including 7.9% in May. The Central Bank of Moldova‘s interest rate in response got raised from 3.6% maintained from May 2024 until an initial hike in January 2025, but the current rate of 6.5% since February was not changed at today’s policy review.
May labor market statistics reported in Australia yielded a 4.1% jobless rate for a fifth consecutive month, an unexpected dip in employment of 2.5k, and a lower labor market participation rate of 67.0%.
New Zealand GDP grew 0.8% last quarter. While above the 0.5% quarterly rise in 4Q 2024, year-on-year growth still remained negative at -0.7%.
The Swiss trade surplus of CHF 22.74 billion over the first five months of 2025 was 29% wider than a year earlier in spite of a 17-month low in the May surplus.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of England, Bank of Norway, Central Bank of Brazil, Central Bank of The Philippines, Central Bank of the Republic of China (Taiwan), Central Bank of Turkey, Hong Kong Monetary Authoritiy, Swiss National Bank
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