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Norway's Hawkish Cut Slows Rate Path

• The Norges Bank cut rates 25bp to 4% as expected, but signalled slower easing than June projections, revising the rate path 20-40bp higher across 2026.
• Committee projects one rate cut annually for three years to a terminal rate above 3% by 2028, reflecting stronger growth and persistent inflation pressures.
• The decision balances economic support with anti-inflation credibility amid trade uncertainty and 4.5% wage growth expectations, constraining future cuts.

BoE Trims QT To Hold Policy Steady

• The MPC unsurprisingly held rates while seeking an answer to its key question around inflation risks amid elevated expectations and a possible structural shift.
• It also trimmed QT by £30bn to £70bn, keeping active sales of long gilts steady in the next three quarterly auctions while skewing QT towards short and medium gilts.
• We still expect the MPC’s presumption of rate cuts resuming to fade out in early 2026 as hawkish pressures persist. Some offsetting fiscal space arises from QT being trimmed.

By Philip Rush

BoC Cuts Amid Trade War Damage

• The Bank of Canada cut the overnight rate by 25bp to 2.5% amid 7.1% unemployment and a 1.6% Q2 GDP contraction from US tariffs.
• Core inflation remains elevated, with the CPI rate at 1.9% but preferred measures around 3%, constraining aggressive easing despite growth weakness.
• The BoC's forward guidance signals it is "proceeding carefully" with October cut probability around 60%, and the terminal rate at 2.25%.

Fed Cuts Amid Deep Policy Division

• Fed cuts rates 25bp as expected, with new Trump appointee Miran dissenting for a 50bp reduction.
• Labour market weakness drove the policy shift as job growth averages 29k monthly, below the levels likely needed to maintain stable unemployment.
• Projections show a 9-9 split between one or two more cuts in 2025, and only one more in 2026. The FOMC is not as dovish as the market's pricing.