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Dissecting Global Interest Rate Decisions Amid Acute Global Uncertainty
CGTN Europe
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19/06/2025
CGTN Europe spoke to City Index Analyst Fiona Cincotta.
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00:00
Well, let's talk now to Fiona Sincotta from City Index.
00:03
Good to see you again, Fiona. Welcome back to the programme.
00:05
Let's begin, if we may, then, with the UK interest rate decision.
00:09
They stayed on hold, but there was a split decision, wasn't there, within the bank.
00:13
What are they thinking, do you think?
00:16
Yes, it was interesting, the vote split.
00:18
So the vote split was six policymakers voted to leave interest rates unchanged
00:24
and three voted to cut by 25 basis points.
00:27
The expectations were actually for a vote split of seven to two.
00:31
So, in fact, the vote split was just slightly more tilted towards a rate cut
00:37
than perhaps what we were expecting,
00:39
which really does open the door to the fact that we're now expecting,
00:42
or the market at least is expecting, an 80% probability of a 25 basis point rate cut in the next meeting.
00:50
The meeting comes as inflation in the UK is still above that 2% target level, 3.4%,
01:00
although we have seen some signs of weakness in the underlying economy and in the labour market.
01:05
So slowly and gradually, inflation is expected to continue cooling
01:10
if, of course, we don't have disruption from high oil prices,
01:15
which could be a potential possibility given the conflict in the Middle East.
01:21
So a similar sort of decision in the United States where the Fed held rates as well,
01:25
despite the President's demands to lower them.
01:28
What do you think happens next there?
01:31
Yes, so it's interesting there because it's a slightly different situation.
01:35
The Federal Reserve also lowered the growth forecast for the US and raised the inflation forecast,
01:42
and that's to do with expectations surrounding Trump's trade tariffs.
01:46
We've obviously got that universal tariff, which has already been implemented, the 10%.
01:51
We've also got the unilateral tariffs that are coming potentially on July the 9th.
01:57
We'll get some more information about what those might be, what's been agreed,
02:00
what hasn't been agreed in the coming weeks.
02:02
But the Federal Reserve Chair, Jerome Powell, did say that he expects inflation to rise meaningfully
02:08
over the coming months and years because of these tariffs.
02:12
So that's why we're seeing that more hawkish stance, that we say,
02:17
or more cautious stance from the Federal Reserve regarding cutting rates further.
02:21
Let's talk about Switzerland, which seems to be on the point of moving back
02:25
into negative interest rate territory.
02:27
They have the rate now at 0%.
02:29
What are the potential implications of that?
02:32
Yeah, so this is really interesting, what's been happening here,
02:36
because the Swiss franc is a safe haven currency.
02:40
So what we've actually seen is the Swiss franc has increased in value by over 10%
02:45
against the US dollar across this year so far because of these uncertainties
02:51
that we've been seeing in the US.
02:52
And that's sort of seen this rotation out of the US dollar into the Swiss franc.
02:58
Now, a high-valued Swiss franc means that imports coming in are cheaper.
03:03
It also adds deflationary implications to the economy, which is why they've had to cut rates again
03:10
and potentially will be needing to cut rates again further in September.
03:15
So that's going to be really interesting to want to watch as well.
03:19
Fiona, great to talk to you.
03:20
Thank you for joining us.
03:21
That's Fiona Sincotta from City Index.
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