Archive

Canada: Policy Rate Held At 2.75% (Consensus 2.75%) in Jul-25

• The Bank of Canada held its policy rate at 2.75% as expected, but disappointed dovish expectations. The decision reflects competing inflation and growth pressures.
• Underlying inflation has risen to 2.5-3.0%, remaining well above the 2% target due to persistent cost pressures. This has shifted the Bank's priority toward price stability over accommodation.
• Future rate cuts require both economic deterioration and contained tariff-related cost pressures. The Bank's scenario-based approach reflects unprecedented trade policy uncertainty.

Chile: 25bp Rate Cut To 4.75% (Consensus 4.75%) in Jul-25

• The Central Bank of Chile unanimously cut the policy rate by 25 basis points to 4.75% in July 2025, in line with market expectations, marking the first reduction of the year following six months of policy stability.
• The decision was driven by better-than-expected inflation outcomes, with the headline CPI measure falling to 4.1% in June while unemployment rose to 8.9%, well above the estimated neutral rate range of 8.0-8.5%.
• The evolution of external risks will influence future rate decisions, particularly US tariff measures on copper exports, alongside domestic inflation convergence and labour market dynamics as the Bank moves gradually towards its neutral rate range of 3.5-4.5%.

ECB: Watching the Good Place

• The ECB kept its description of the policy setting as in a good place, and wants to watch the news in the next few months. Lagarde refused to emphasise September’s meeting.
• Euro strength is depressing inflation below target in the near-term forecasts, but the ECB remains relaxed about this. It sees the outlook as broadly unchanged since June.
• We still see rolling resilience in the economy and doubt US trade policy will break it. More rate cuts are inappropriate without demand destruction, so we don’t expect any.

By Philip Rush

Indonesia: 25bp Rate Cut To 5.25% (Consensus 5.25%) in Jul-25

• Bank Indonesia cut its benchmark rate by 25bp to 5.25% in July 2025, marking the fourth easing since September amid low inflation and strong foreign exchange reserves.
• The decision reflects confidence in 1.87% June inflation staying within the 2.5±1% target range, the stable rupiah supported by a robust intervention framework, and the need for growth stimulus.
• Future easing depends on continued inflation anchoring, currency stability, and global developments, including US trade policy and Federal Reserve actions affecting capital flows.