18.06.25 - All eyes on central banks

This week is packed with key central bank decisions, keeping investors on edge.

• Bank of Japan and Sweden’s Riksbank have already left their interest rates unchanged, in line with expectations.

• Tonight, all eyes are on the US Federal Reserve (Fed), where the market broadly anticipates no change in interest rates.

• Tomorrow, the Swiss National Bank (SNB) is expected to cut rates by 25bps. However, the SNB has a history of surprises. A deeper cut of 50bps, effectively returning to negative rates, cannot be fully ruled out.

• Also on Thursday, the Bank of England (BoE) will announce its decision. Today’s inflation print supports the consensus for no rate change.

Markets: Investors remain cautious, with equities trading sideways on low volume, reflecting a classic “wait-and-see” approach ahead of the policy signals. Same for US dollar currency, commodities and interest rates

My view: Rising geopolitical tensions, fragile trade negotiations, and mounting political pressure—particularly from Donald Trump, who continues to push for lower U.S. interest rates—are adding layers of complexity to central bank decision-making. A rate change at tonight’s meeting would be a major surprise.

Investor attention is on the Fed’s policy statement and protocol. Despite persistent inflation, markets still price in one to two rate cuts by year-end. However, the recent rebound in energy prices could prompt a more hawkish tone from the Fed, potentially catching markets off guard. This increases the risk of a sharp reaction across bonds, equities, and gold. Risk of higher volatility is clearly elevated heading into the announcement.

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