Help
Fed's hawkish cut vs. BoE's dovish stand
The BoE signaled dovish, the BoJ held its stance, and the Fed cut rates while signaling caution on future easing.
BoE held rates at 4.75% with a dovish 6-3 vote.
BoJ maintained a 0.25% rate with an 8-1 vote.
Fed cut rates by 25bps to 4.25-4.50%.
Central banks in the UK, Japan, and the United States showcased varied policy approaches this week, underscoring differences in economic conditions and inflationary pressures across major economies.
BoE maintains rates amid dovish sentiment
The Bank of England (BoE) held its Bank Rate steady at 4.75% in a 6-3 vote. This marks a more dovish stance, as three members of the Monetary Policy Committee (MPC)—Swati Dhingra, Dave Ramsden, and Alan Taylor—advocated for a rate cut.
In its policy statement, the BoE reiterated the need for restrictive monetary policy to persist long enough to guide inflation sustainably back to the 2% target. November's CPI inflation rose to 2.6%, slightly exceeding expectations, while services inflation remained elevated. However, weakening near-term activity indicators and revised GDP growth projections point to a more fragile economic outlook.
The BoE also cited global uncertainties, including inflationary shocks, geopolitical tensions, and domestic policy risks from the Autumn Budget, as potential headwinds to its inflation-targeting goals.
BoJ stays cautious, highlights wage risks
The Bank of Japan (BoJ) maintained its ultra-accommodative stance, keeping its policy rate at 0.25% with an 8-1 vote. The lone dissenter, Naoki Tamura, advocated for a hike to 0.50%, emphasizing the need for a gradual exit from prolonged monetary easing.
Governor Kazuo Ueda signaled a cautious approach to rate hikes, citing moderate underlying inflation and uncertainties in global economic conditions. He also stressed the importance of monitoring wage trends, particularly next year’s wage negotiations, which could influence Japan's inflationary dynamics.
While Japan’s inflation remains below the levels seen in Western economies, the BoJ continues to balance its support for economic recovery with the need for long-term price stability.
Fed delivers rate cut, signals slower easing path
The Federal Reserve implemented a widely anticipated 25bps rate cut, bringing the federal funds rate to 4.25–4.50%. The decision was not unanimous, with Cleveland Fed President Beth Hammack dissenting in favor of holding rates steady.
Updated economic projections highlight the Fed’s caution. Policymakers revised their expectations for the terminal rate and inflation, signaling a slower pace of easing. Rates are now projected to reach 3.9% by the end of 2025, higher than the previous estimate of 3.4%. Meanwhile, core PCE inflation expectations for 2025 were revised up from 2.2% to 2.5%.
These adjustments reflect persistent inflationary pressures and a resilient economy, prompting the Fed to adopt a measured approach to policy normalization.
