Central Banks and Inflation Data in the Forefront this Wednesday
June 18, 2025
The Federal Reserve’s interest rate announcement, updated forecasts and press conference due this afternoon are not the only central bank dog-and-pony shows for investors to absorb. They already have learned of unchanged interest rates in Indonesia, Chile and Georgia, as well as a 25-basis point rate reduction by officials at the Swedish Riksbank.
The Federal Open Market Committee’s event that will commence at 14:00 EDT will be the day’s main event. The 4.25-4.50% federal funds target, which President Trump has criticized repeatedly too high, will be almost certainly left as is once again. The main dramatics will lie in the accompanying macroeconomic forecasts, the indication of individual committee members’ favored interest rate path, and Chairman Powell’s press conference with reporters that beings at 14:30 EDT.
Overnight financial market action has been unremarkable ahead of U.S. data and the later Fed’s decision. The dollar slid 0.4% against the Korean won, 0.3% versus the Australian dollar, 0.2% relative to the euro, loonie and kiwi, and yen and 0.1% vis-a-vs sterling and the Mexican peso. Ten-year sovereign debt yields are down three basis points in Great Britain, two bps in the United States and a basis point each in Germany, Japan, and France. Gold‘s prices is 0.1% softer, Bitcoin is steady, and WTI oil has fallen 0.5%.
Ahead of today’s release of U.S. housing starts and jobless insurance claims (arriving a day early due to tomorrow’s Juneteenth holiday), U.S. stock futures are barely changed. Equity markets in Asia rose 0.9% in Japan and 0.7% in Taiwan and South Korea but fell by 0.7% in Indonesia and 0.3% in Singapore. Key European equity markets show losses but of less than 0.5%.
The Swedish Riksbank’s rate cut from 2.25% to 2.0% had been widely expected. It was the first change since a 25-basis point cut in January. At 2.0%, the new rate is half the peak of 4.0% from September 2023 to May 2024 and at its lowest level since November 2022. Swedish monetary officials are likely not done with this rate reduction cycle, but that point is not far away. Updated forecasts show the chance of one more 25-bp cut in the second half of 2025 or perhaps early in 2026. Projected Swedish growth this year was revised downward by 0.7 percentage points to 1.2%, and a weaker demand dynamic due to trade policy changes and geopolitical strains is expected to foster lower inflation. The targeted CPIF path now is forecast to rise 2.4% this year, then 1.7% in 2026. A released statement cautions that
The outlook for inflation and economic activity is uncertain. There are substantial risks linked to trade policy and the geopolitical tensions, not least as a result of the escalating conflict in the Middle East, which could affect economic developments abroad. These risks and the questions about the strength of domestic demand mean that it is uncertain how quickly the Swedish economy will recover.
Bank Indonesia’s reference interest rate had been cut by 25 basis points to 5.5% in May, bringing such to its lowest level since January 2023 and down from a peak of 6.25% maintained briefly from May to September of last year. The central bank targets inflation at 1.5-3.5%, and such fell from a 1.95% 8-month high in April back to 1.6% in May, near the target floor. The policy goals of price stability, a stable rupiah and sufficient growth are being met reasonably, but external uncertainties remain elevated.
The National Bank of Georgia‘s policy rate hasn’t moved since a 25-basis point reduction in May 2024 that culminated 150-basis points of cuts last year on top of 150 basis points of reduction in 2023. The 11% peak occurred from August 2022 until an initial cut in May of 2023. Georgian CPI inflation of 3.5% as of May was above the target of 3% and a 2024 low of 0.3% last October but well down from 13.9% touched in January 2022. Officials expect inflation to receded to target, and solid growth removes any urgency from lowering interest rates at this time.
The Central Bank of Chile‘s 5.0% policy rate level was kept as is. There hasn’t been a change yet this year. It previously was reduced by 300 basis points in the second half of 2023 and 325 basis points during 2024. CPI inflation of 4.4% currently exceeds target but is well down from a peak of 14.1% in August 2022. Recent growth in Chile has exceeded expectations.
Among consumer price data reported this Wednesday,
- British inflation edged down from April’s 15-month high of 3.5% to 3.4% in May as had been widely predicted. Service sector price inflation settled back to 4.7% from April’s spike of 5.4%. Inflation’s low point last year was 1.7% in September, and the cyclical high in 2022 was 11.1%.
- Euroland inflation last month was left unrevised from preliminary estimates. Consumer prices in May were unchanged from April and 1.9% above their year-earlier level. That’s the lowest since 1.7% in September 2024. Service sector prices climbed 3.2% year-on-year, down from April’s 4.0% reading.
- Consumer prices in New Zealand advanced 0.9% in the first quarter and accelerated to a year-on-year 2.5% from 2.2% recorded in the second half of 2024. At 2.5%, inflation was down from 4.0% in the first quarter of 2024.
- South African CPI inflation held steady at 2.8% in May and not far above March’s 57-month low of 2.7%.
The U.S. 30-year fixed fixed mortgage rate fell to a 6-week low of 6.84% in the week of June 13th. Even so, mortgage applications declined by 2.6%.
Euroland’s seasonally adjusted current account surplus narrowed to EUR 19.8 billion in April from EUR 50.9 billion in March. That swing reflects the distortion of U.S. planned tariffs, which at the start of April appeared sky-high and imminently so. The March-April monthly average of EUR 35.4 billion was down from EUR 40.4 billion in the first two months of this year. As a percentage of GDP, the surplus over the latest twelve reported months was 2.9%, up from 2.3% in the previous 12 months through May 2024.
Japan’s customs clearance trade deficit of JPY 2.344 trillion in January-April was 35% narrower than a year earlier. Core Japanese domestic machinery orders sank 9.1% in April but were 6.6% above their year-earlier level.
Led by a 40% plunge in the Northeastern part of the United States, housing starts nationwide dived 9.8% last month to their lowest level since Donald Trump was president before in the early days of the Covid pandemic. Starts were 4.6% below May 2024’s level. Housing permits slid 2.0% on month and 1.0% on year. An on-consensus total of 245k new jobless insurance claims filed last week resulted in the highest 4-week average since the week ending July 1, 2023. This year’s 4-week low-point occurred in the period ending January 11th.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank Indonesia, British CPI, Central Bank of Chile, Euroland CPI and current account, National Bank of Geogia, Swedish Riksbank
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