Major global central banks are set to meet through September, with markets watching closely for fresh policy signals. Amid tariff-driven economic uncertainty, fears of slowing growth, and persistently soft inflation, the calls for interest rate cuts are growing louder. But for some, the path ahead may not be so straightforward.
The European Central Bank (ECB), which meets 11-12 September, faces a particularly delicate decision. Inflation in the eurozone edged up in August to 2.1% year-on-year, but stayed close to the ECB’s 2% target.
“With interest rates set at neutral levels, you could argue that this is a logical time for the ECB to keep rates on hold,” ING’s Netherlands chief economist Bert Colijn noted in a 2 September report. “But still, with slow growth, significant risks of downside surprises still prevalent, and the Federal Reserve expected to resume cutting rates again, the doves on the governing council could still push for one more cut before holding steady.”
A neutral interest rate is one that is neither expansionary nor contractionary.
The ECB’s meeting will be followed by the US Federal Reserve on 16-17 September, the Bank of England on 18 September, and the Bank of Japan on 19 September. Of these, the Fed’s decision and commentary are most consequential for Asian economies, which are highly sensitive to interest rate differentials and US dollar moves.
The Fed’s latest Beige Book survey indicated that US economic activity was flat or slightly weaker across most of the country in recent weeks. Meanwhile, the July Job Openings and Labor Turnover Survey (JOLTS) showed further cooling in the labour market. Market expectations are for a 25-basis-point (bps) rate cut this month, which would mark the first move after the US Fed held rates steady throughout 2025 so far.
“In his Jackson Hole speech, Fed Chair Powell noted that the risk between inflation and employment was shifting, warranting adjustment to the Fed’s policy stance. We expect a 25 bps rate cut later this month,” said a recent report by Goldman Sachs Asset Management. “The US economy is showing signs of slowdown: a softening labour market, depressed sentiment, and fiscal drag. However, financial risks remain largely in check,” it added.
Nomura’s Asia call
A Fed rate cut, against the backdrop of benign inflation and subdued growth in Asia, could nudge monetary policy across the region towards further easing.
“Most Asian central banks have been in wait-and-watch mode lately, but we expect the next leg of monetary policy easing to begin soon,” said Nomura Global Markets Research report dated 27 August. The global research house expects more cuts than consensus and/or market is pricing-in.
For India, Nomura has forecast two 25 bps rate cuts by the Reserve Bank of India in October and December, compared to the market consensus of one. In Korea, it expects two 25 bps rate cuts in October and February 2026, versus market pricing of one cut. Indonesia could see a sequence of 25 bps cuts in September, December, and March, while Thailand may deliver an additional 50 bps cut in October, double the consensus expectation, according to Nomura.
