Global Central Banks Turn Hawkish Amid Trump Tariff Fallout - Macquarie Says Central Bankers Become Followers

TradingKey — During this "super central bank week," policymakers around the world expressed hesitation about further rate-cut cycles citing uncertainty stemming from Donald Trump’s tariff policies. 

Following the Fed’s warnings about stagflation in its Summary of Economic Projections (SEP), the Bank of England (BoE), Swiss National Bank (SNB), and Sweden’s Riksbank have adopted a more cautious stance on further easing.

Since 2024, major central banks had embarked on a synchronized wave of rate cuts. However, Trump’s global tariff offensive has reignited inflation concerns, disrupting the anticipated path of monetary easing.

In March, the Fed, BoE, and Riksbank held rates steady, while the SNB and European Central Bank (ECB) cut rates by 25 basis points. Despite these divergent moves, policymakers face a dilemma: Trump’s tariffs threaten to rekindle inflation while simultaneously stifling economic growth.

Economists at Allianz Trade note that trade policy uncertainty has become a top concern for central banks, as it risks significantly dampening economic activity. The dual impact of heightened trade uncertainty and persistent inflation has left policymakers in a bind.

• ECB President Christine Lagarde stated that given the unpredictable trade environment, the bank could not commit to a definitive path for future rate adjustments.
• BoE Governor Andrew Bailey emphasized that they are being  forced to respondto rapidly evolving global developments, whose inflationary and economic impacts remain highly uncertain. He added that they are still waiting to see how the tariff conflicts unfold.
• The Riksbank, which reduced its policy rate to a two-year low, declared its easing cycle complete, citing exceptionally high external uncertainties. Following its March rate cut, the SNB indicated that further easing is now naturally less likely.

Macquarie analysts said that central banks are no longer either the frontmen or rhythm-keepers of macroeconomic policy. Instead, they’re now followers, who are ceding their dynamism to events in federal legislatures, executive mansions and diplomatic halls.