Your Monday FX compass in central bank weeks – 5 May 2025

Central Bank Meetings:

⚪ USA 07.05.2025

Expected: 4.50% (unchanged)

With its focus on the dual mandate of maximum employment and price stability the Fed seems to find itself still in a comfortable position: The unemployment rate is at historically low levels of 4.2%, inflation, albeit still not quite at target, is in check with the latest CPI figures at 2.4% (YoY). The only datapoint with a somewhat worrying touch was the GDP of Q1 at -0.3% which was much lower than the expected 0.2%. Anything but an unchanged federal funds target rate of 4.5% would be a big surprise.

⚪ UK 08.05.2025

Expected: 4.25% (-0.25%)

The Bank of England is set to cut interest rate with a view to fending off negative impacts from US tariffs. The inflation rate currently stands at 2.6% and so does the Q4 2024 GDP print (2.6%) while unemployment stands at 4.4%. In its annual Monetary Policy Report Forecast released in February, the BoE expects inflation to accelerate faster than GDP through to 2026 accompanied by a stable unemployment rate at4.5%. The rather bleak outlook on the economy paired with the uncertainty out of the US leads the markets to expect a rate cut by 25bp.

⚪ SEK 08.05.2025

Expected 2.25% (unchanged)

The objective of monetary policy is to maintain a low and stable rate of inflation of 2.00%. Secondarily, the Riksbank contributes to a balanced development of output and employment. The inflation currently stands at 2.3% while GDP for Q1 came out at a meager 1.1% and unemployment is at a whopping 8.5% as of March 2025. Even though these figures might be interpreted as a case for lowering rates, the market does not expect the Riksbank to be ready to take this step yet but rather gives a 50/50 chance for lower rates in mid-June.

⚪ NOK 08.05.2025

Expected 4.50% (unchanged)

Norges Bank’s primary objective is ensuring low and stable inflation but also keeping employment as high as possible. Unemployment stands at 4.40% (March), Inflation at 2.6% and GDP growth was 2.1% for 2024. In its March assessment the bank stated that “There is uncertainty about future economic developments, but the Committee’s current assessment of the outlook implies that the policy rate will most likely be reduced in the course of 2025.” Also, “Higher tariffs and trade policy uncertainty are expected to reduce global economic growth, but the trade tariffs implemented to date will probably have limited impact on economic activity in Norway.” Together, these statements conform to the markets expectation that the central bank will keep rates on hold in May but may lower the rate in mid-June.