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BoE Closer To Slowing Cuts

• The shockingly divided MPC’s offsetting votes weren’t the most hawkish signal alongside its 25bp rate cut. Most of the five backing it were only recently convinced.
• Maintained guidance for a gradual and careful approach not only disappoints dovish hopes, but signals a 5:2:2 bias between a slower, constant and faster pace of cuts.
• We still expect this gradualism to help the BoE resist cutting in August (and June) while waiting for dovish evidence that never emerges, making this the last cut.

By Philip Rush

Malaysia: Policy Rate Held At 3.0% (Consensus 3.0%) in May-25

• Bank Negara Malaysia held its official policy rate at 3%, in line with consensus, maintaining a supportive stance amid resilient domestic demand and heightened global trade tensions. The decision reflects concern over downside risks from external uncertainties and weaker global sentiment.
• Headline and core inflation remained subdued in Q1 2025, at 1.5% and 1.9% respectively, with the outlook deemed manageable due to easing global cost pressures and limited domestic demand-pull inflation. Inflation risks remain externally driven, linked to commodity markets and trade policies.
• The ringgit continues to be influenced by external volatility, though Malaysia’s structural reforms and narrowing interest rate differentials lend support. Future rate decisions will depend on the trajectory of inflation and the balance of risks to growth amid an uncertain global environment.

Norway: Rates Held At 4.5% (Consensus 4.5%) in May-25

• The Norges Bank held its policy rate at 4.5% in May, consistent with consensus and March guidance, citing persistent inflation and heightened global uncertainty as reasons to maintain a restrictive stance.
• Although inflation has eased, underlying pressures remain strong, with CPI-ATE stable at 3.4% and a weaker krone raising imported goods prices, complicating the timing of future easing.
• The Committee continues to signal a likely rate cut in 2025 but flagged increased trade barriers and divergent global developments as factors that could shift the policy trajectory in either direction.

Sweden: Policy Rate Held At 2.25% (Consensus 2.25%) in May-25

• The Riksbank held the policy rate at 2.25%, in line with expectations, citing a well-balanced monetary stance amid elevated inflation and softening growth prospects.
• Although inflation remains somewhat high, the Riksbank views this as temporary and now considers downside risks to inflation more likely than upside ones, suggesting a potential easing bias.
• External uncertainty, driven by US trade policy and geopolitical tensions, plus falling household confidence domestically, are key factors likely to influence the interest rate path.