The Shiro Copr, JAKARTA - U.S. President Donald Trump still having trouble pressing Federal Reserve If they want to cut interest rates. Meanwhile, many central banks around the world seem much more ready to ease their monetary policies, mostly in response to the wave of US trade tariffs.
Quoting Bloomberg, On Monday (7/21/2025), average interest rates in developed countries are expected to fall by more than 70 basis points this year, with even sharper declines occurring in developing countries.
Overall monetary policy strategy reflects growing concerns among central bank officials that President Donald Trump's efforts to bring manufacturing back and overhaul the global trading system--if sustained--are more likely to hinder economic growth than trigger an inflation surge.
Acting Managing Director of the International Monetary Fund (IMF), Gita Gopinath, said that weak demand and falling energy prices due to inflation indicate a declining trend that will continue, although its impact will vary from country to country.
"Risk of decline remains a dominant factor in global economic projections, while uncertainty levels remain very high," said Gopinath in a statement after last week's meeting of G20 finance ministers.
In the United States, concerns about the inflationary impact of import price surges due to tariffs are expected to continue to haunt the Federal Reserve.
Meanwhile, Global Chief Economist Bloomberg Economics Saying the impact of tariffs on the US is very complex. Rising import prices threaten to increase inflation while slowing the growth rate.
"Esta tensão é esperada para fazer o Fed adiar a medida de corte de juros até o final de 2025 — independentemente das pressões de Trump, que deseja uma política monetária mais flexível", disse Orlik.
Nevertheless, he said for other countries, the impact is more linear. Additional tariffs mean weaker growth, lower inflation, and a greater likelihood of policy easing.
Many factors will determine the direction of future policy, depending on the results of the trade agreement achieved, plus Trump's ability to create surprises that often test the resilience of market players and economic forecasters.
His actions toward the Fed, for example, are just one of many potential shocks that could change the direction of financial markets and affect interest rate decisions.
The Fed's Rate Cut Projections
Under Trump's pressure, the Fed is expected to hold interest rates steady until at least the fourth quarter, when conditions allow a 25 basis point cut.
"we estimate only one round of tightening this year, possibly in the fourth quarter," said Anna Wong from Bloomberg Economics.
While some officials, such as Christopher Waller and Michelle Bowman, have opened the door to rate cuts due to the temporary effects of tariffs, the majority remain cautious. Of the 19 Fed officials, seven even expect no rate cuts at all this year.
On the other hand, Trump has increased personal pressure on Federal Reserve Chair Jerome Powell, including considering a successor who is more "pro-rate cuts" after Powell's term ends in May.
Europe and Canada
Meanwhile, the European Central Bank (ECB), which is now quite satisfied with its inflation performance, is expected to cut interest rates twice more in September and December, down to the level of 1.5%.
"Rising U.S. tariffs on European Union exports, including pharmaceutical products, will put deflationary pressure on the eurozone economy," said an economist. Bloomberg Economics David Powell
The Bank of England is in a difficult position. This is because inflation remains above 3%, yet the labor market is weakening. Interest rates are expected to fall to 3.75% by the end of the year.
While the Bank of Canada may also cut interest rates two more times, it is influenced by the weakening export sector due to tariffs and unclear government spending on fiscal policy.
Japan is Waiting, BI Cuts Interest Rate
The Bank of Japan chose to wait for clearer data before raising the interest rate from 0.5% to 0.75% at the end of the year. Political and market uncertainties still linger. "Conditions are not conducive to monetary tightening," said Taro Kimura.
On the contrary, Bank Indonesia is preparing to cut interest rates further after reaching a trade agreement with the US.
"we expect further cuts of up to a total of 50 basis points in the second half," said Tamara Henderson. The stable rupiah exchange rate provides room for further easing.
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