Sam Fleming, Valentina Romei, Ian Smith, and Claire Jones of the Financial Times report that Trump’s trade war is deepening the divide between central banks. The US Federal Reserve holds rates steady, while the Bank of England and ECB cut rates due to tariff concerns, creating a global policy gap. They write:
Donald Trump’s threatened trade war is driving a wider wedge between the world’s biggest central banks, as the US Federal Reserve holds off rate cuts even as growth concerns hang heavily over other economies.
On Thursday, the Bank of England became the latest central bank to cut interest rates this year, lowering bank rate by a quarter point to 4.5 per cent.
The Fed, however, is taking a different approach. It held borrowing costs last week, with chair Jay Powell indicating interest rates will remain on hold as the strong US economy enables policymakers to wait and see how tariffs and Trump’s other policies impact inflation. […]
The Bank of Canada last week cut interest rates to 3 per cent as it warned a trade conflict with the US would badly hurt economic activity while also pushing up prices. Governor Tiff Macklem said the move was made to get ahead of the impact of tariffs should Trump impose a 25 per cent levy on Canadian exports.
Canada sells about 77 per cent of its merchandise exports to the US, according to official statistics. […]
“The Bank of England will hope the UK will avoid direct tariffs,” said Krishna Guha of Evercore ISI. “But the UK as an open economy will be hit by second-round effects of weaker global trade.”
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