--- title: "Rate cuts come thick and fast in Europe and Canada as Trump tariffs loom" description: "Central banks in the euro area and Switzerland cut rates on Thursday, a day after Canada slashed rates by a hefty 50 bps. Australia, meanwhile, eased its previously dovish tone this week, while Japan remains an outlier." type: "NewsArticle" publisher: "Daily Maverick" site: "https://www.dailymaverick.co.za" section: "Newsdeck" author: "Reuters" author_url: "https://www.dailymaverick.co.za/author/reuters/" canonical_url: "https://www.dailymaverick.co.za/article/2024-12-13-rate-cuts-come-thick-and-fast-in-europe-and-canada-as-trump-tariffs-loom/" published: "2024-12-13T00:28:11" updated: "2024-12-13T00:30:49" lang: "en-ZA" word_count: 746 --- # Rate cuts come thick and fast in Europe and Canada as Trump tariffs loom > Central banks in the euro area and Switzerland cut rates on Thursday, a day after Canada slashed rates by a hefty 50 bps. Australia, meanwhile, eased its previously dovish tone this week, while Japan remains an outlier. By Reuters · Published 13 December 2024, 02:28 SAST · Updated 13 December 2024, 02:30 SAST ## Key points - As central banks around the globe scramble to cut rates like they're in a monetary game of musical chairs, traders are left wondering if they’ll find a seat—or just a sinking ship—before the music stops. - The Swiss National Bank cut rates by 50 bps to 0.5%, its largest reduction in nearly a decade, amid low inflation and a strong franc. - Canada’s central bank also lowered rates by 50 bps to 3.25%, signaling gradual easing ahead as inflation rises and economic concerns grow. - The ECB continues its easing strategy, cutting its deposit rate by 25 bps to 3% and hinting at further reductions to support growth. - The Reserve Bank of Australia maintained rates at 4.35% but indicated a potential cut in February due to a slowdown in economic growth. ## Content Here's where major rate-setters stand and what traders expect next. **1/ Switzerland** The Swiss National Bank, which has been at the forefront of monetary easing, cut rates by an unexpectedly large 50 basis points (bps) to 0.5% on Thursday, the lowest since November 2022 and the bank's biggest reduction in almost a decade. Swiss annual inflation was most recently reported at just 0.7% and the SNB, which is alert to the safe-haven Swiss franc strengthening beyond levels domestic exporters can bear, [said](https://www.reutersconnect.com/all?search=all%3AL1N3JT0KT&linkedFromStory=true) it could reduce borrowing costs again next year. **2/ Canada** The Bank of Canada cut rates [by 50 bps](https://www.reutersconnect.com/all?search=all%3AL4N3M10G8&linkedFromStory=true) to 3.25% on Wednesday, marking the first time since the COVID-19 outbreak that it has implemented consecutive half-point cuts. It indicated further easing would be gradual after annual inflation [accelerated](https://www.reutersconnect.com/all?search=all%3AL4N3MP035&linkedFromStory=true) to 2%, but with Canada's weak economy [threatened by](https://www.reutersconnect.com/all?search=all%3AL2N3N105R&linkedFromStory=true) US President-elect Donald Trump's proposed tariffs, markets placed 70% odds on a 25 bps cut next month. **3/ Sweden** Sweden's economy is [shrinking](https://www.reutersconnect.com/all?search=all%3AAPN2FPEKQ&linkedFromStory=true) and its central bank, which [lowered borrowing costs](https://www.reutersconnect.com/all?search=all%3AS8N3LD05R&linkedFromStory=true) by 50 bps to 2.75% in November, has guided markets to expect further easing next year. The Riksbank meets next week and markets see a 25bps cut as more likely than not, with about 90 bps of easing priced in by August. **4/ New Zealand** The Reserve Bank of New Zealand painted a bleak economic picture in its latest [Financial Stability Report](https://www.reutersconnect.com/all?search=all%3AL1N3MB0ZT&linkedFromStory=true), and while it does not meet to set rates again until February, traders see good chances of swift and rapid cuts. The RBNZ has lowered its cash rate by 75 bps to 4.25% so far this cycle and markets expect it to fall to just over 3% by late 2025. **5/ Eurozone** The ECB is firmly in easing mode, [cutting](https://www.reutersconnect.com/all?search=all%3AL1N3ND06B&linkedFromStory=true) its deposit rate by [25 bps to 3%](https://www.reutersconnect.com/all?search=all%3AL8N3ND0OW&linkedFromStory=true) on Thursday in its fourth such move this year and keeping the door open to further reductions. It also signalled that further cuts are possible by removing a reference to keeping rates "sufficiently restrictive", economic jargon for a level of borrowing costs that curbs economic growth. Markets price in roughly 130 bps worth of tightening by end-2025. **6/ United States** The Federal Reserve is moving more cautiously with monetary easing given a robust economy and President-elect Donald Trump's proposed tax cuts and import tariffs complicate the US inflation outlook. While the Fed [cut its main funds rate](https://www.reutersconnect.com/all?search=all%3AL1N3ME0SU&linkedFromStory=true) by 25bps to a range of 4.5%-4.75% in November and traders [expect](https://www.reutersconnect.com/all?search=all%3AL4N3NB0BU&linkedFromStory=true) a further quarter point cut on 18 December, US consumers are [optimistic](https://www.reutersconnect.com/all?search=all%3AL1N3NA0QP&linkedFromStory=true) about the economy and their earnings prospects, and ready to spend. **7/Britain** The Bank of England is also holding back from rapid easing, having [cut rates](https://www.reutersconnect.com/all?search=all%3AL8N3ME1NJ&linkedFromStory=true) in November for only the second time since 2020. Money markets imply a 90% probability the BoE will hold steady at its Dec. 19 meeting. Traders see the UK base rate falling from 4.75% currently to about 3.9% by end-2025, as higher government spending under the new Labour leadership boosts [growth](https://www.reutersconnect.com/all?search=all%3AL2N3N40ST&linkedFromStory=true) and keeps inflation running above the BoE's 2% target. **8/ Norway** Norway's central bank has yet to start easing, having held its policy rate at a 16-year high of 4.5% in November and guided markets not to expect a cut at its 19 December meeting. A robust economy helped push annual [core inflation](https://www.reutersconnect.com/all?search=all%3AL8N3NB08Y&linkedFromStory=true) up to 3% in November in an unwelcome move away from the Norges Bank's 2% target. Markets currently price a rate cut by March. **9/ Australia** The Reserve Bank of Australia [held rates steady](https://www.reutersconnect.com/all?search=all%3AL1N3NB05U&linkedFromStory=true) at a 12-year high of 4.35% on Tuesday but softened its tone on inflation, raising the market-implied probability of a quarter-point cut in February to more than 50%. The RBA, which has not changed borrowing costs for more than a year, has taken note of a surprise [economic growth slowdown](https://www.reutersconnect.com/all?search=all%3AL2N3N500Q&linkedFromStory=true) as high rates deterred households from spending despite a recent round of [tax cuts](https://www.reutersconnect.com/all?search=all%3AL4N3IS00N&linkedFromStory=true). **10/ Japan** Rising inflation prompted longtime outlier the Bank of Japan to nudge borrowing costs up to 0.25% in July in a move that wreaked [havoc on global trades](https://www.reutersconnect.com/all?search=all%3AL1N3JT0KT&linkedFromStory=true) that were underpinned by its ultra-loose monetary policies, generating a brief market rout. The BOJ has [held rates](https://www.reutersconnect.com/all?search=all%3AL1N3M61PH&linkedFromStory=true) since and is expected to do so again next week following [political uncertainty](https://www.reutersconnect.com/all?search=all%3AL1N3M80E2&linkedFromStory=true) after Japan's ruling coalition lost its majority in [October elections,](https://www.reutersconnect.com/all?search=all%3AL4N3M10G8&linkedFromStory=true)with a 25 bps hike seen as more likely than not in January. (Reporting by Naomi Rovnick; Editing by Dhara Ranasinghe and Alexandra Hudson)