Investing & Performance | 19 June 2025
interest rate watch - june 2025
What does the latest round of global interest rate decisions mean for economies and investors?
June has seen the world’s four major central banks decide their interest rates policy.
- The US Federal Reserve (Fed) held rates at 4.50%
- The Bank of England (BOE) held rates at 4.25%
- The European Central Bank (ECB) lowered rates by 25 basis points to 2.00% / 2.15%
- The Bank of Japan (BOJ) held rates at 0.50%
The below chart reflects these current rates and the expected rate trajectory for each central bank.
Past performance is not an indicator of future performance and should not be relied on as such. The value of investments can fall as well as rise, and you may not get back the full amount you invest. Data accurate as of 19/06/2025.
Our view
- Globally, central banks have had a loosening stance for some time. We expect this to continue with the exception of the Bank of Japan which is in a rate raising cycle.
- One point of difference between now and before President Trump took office is that the Fed would probably now be cutting rates rather than holding them were it not for the trade tariffs. This makes rate predictions into year-end tricky, however the domestic economic fundamentals within the US allow for lower rates and we expect that to remain the trajectory.
- Progress on inflation in the US has been very impressive, bringing it almost back to the Fed’s 2% target. Tariffs could reverse this but, in our view, the impact will be temporary.
- In 2024, the Fed acted proactively to support the economy as growth slowed. Tariff complications and ongoing negotiations do however mean there is a risk that the Fed is more reactive in 2025.
- We are seeing growing consensus for rate cuts in the US in 2026. This is due to the expectation that President Trump will name an incoming Fed chair who is dovish on monetary policy.
- In the UK, although headline inflation has been sticky, there is ongoing evidence of easing price pressures in services and wages, which should allow the BOE to resume cuts later this year.
What this means for investors
The journey to lower rates is continuing slowly. While Trump’s tariffs have impacted the global economy, a lower cost of borrowing on both sides of the Atlantic should potentially be supportive for businesses and equity markets. We continue to see resilient, though potentially slowing, growth as our base case, supporting our overweight to equities.
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