US Fed starts easing path, other major central banks on hold

By Sara Rossi

LONDON (Reuters) -The U.S. Federal Reserve has delivered its first rate cut since December, diverging from most other major central banks that have kept interest rates unchanged.

The Bank of England kept rates steady on Thursday and the Bank of Japan is expected to follow on Friday, while expectations for further euro zone rate cuts are fading.

Here’s where 10 major central banks stand:

1/ SWITZERLAND

The Swiss National Bank cut its key rate to 0% in June. Investors have pondered whether a return to negative territory is likely, but markets now expect the SNB to hold rates when it meets next Thursday.

Chairman Martin Schlegel reiterated that the bar is high for a return to negative rates, but does not rule out such a move. Inflation holding above the bottom of the SNB’s 0-2% target band in August means traders do not anticipate negative rates soon.

2/ CANADA

The Bank of Canada reduced its key rate to a three-year low of 2.5% on Wednesday, the first cut in six months, citing a weak jobs market and less concern about underlying price pressures.

It paused its easing campaign in March after reducing rates by a total of 225 basis points in nine months, starting in June last year. Markets price in a roughly 40% chance of another cut when the central bank meets again next month.

3/ SWEDEN

Sweden’s Riksbank has also cut rates substantially, despite sticky core inflation, but looks set to remain on hold when it meets next week.

It says that August inflation data were supportive of the Riksbank’s view that price pressures are likely to be temporary.

4/ NEW ZEALAND

Domestic and global growth headwinds could pave the way for the Reserve Bank of New Zealand to cut rates at its October 8 meeting and probably once more by the year’s end, a Reuters poll of economists shows.

The RBNZ cut its policy rate by 25 bps to a three-year low of 3% last month.

5/ EURO ZONE

Euro zone rate setters last week kept their key rate on hold at 2% for a second straight meeting, with ECB chief Christine Lagarde reiterating that the bank remains in a “good place” and said risks to the economy had become more balanced than before.

Markets sense the ECB cycle is at or near an end and price in roughly 12 bps of cuts by next July.

6/ UNITED STATES

Moving in the opposite direction, the Federal Reserve reduced rates on Wednesday and indicated more cuts would follow in October and December to support the jobs market. Fed Chair Jerome Powell said the softening job market was now key for policymakers.

U.S. President Donald Trump, meanwhile, is trying to fire Fed Governor Lisa Cook. New Fed Governor Stephen Miran, sworn in on Tuesday, cast the only dissenting vote – he opted for a bigger 50 bps rate cut.