World's central banks tread cautiously in April as trade tensions cloud global outlook

ISTANBUL

Global central banks ended April with cautious moves, as ongoing inflation battles and escalating trade protectionism – primarily driven by the United States – deepened market uncertainty and clouded global growth expectations.

Many monetary authorities pointed to a widening recession-inflation dilemma in their latest statements, as governments weighed the fallout of renewed tariffs, shifting trade dynamics, and weak consumer confidence.

US President Donald Trump’s tariff-centered “America First” policies have triggered concern across international markets, leading several central banks to delay further action on interest rates.

Steady rates dominate amid trade-driven caution

The Bank of Canada held its policy rate at 2.75% for a seventh straight meeting, citing trade unpredictability and tariff concerns tied to the US. Bank governor Tiff Macklem warned that American protectionism has disrupted markets and made forward planning more difficult. The bank offered two potential outlooks – one assuming limited tariffs, the other anticipating a prolonged trade war.

South Korea’s Bank of Korea also kept its policy rate unchanged at 2.75%, citing stable inflation but rising risks to growth. The bank highlighted sluggish first-quarter activity and worsening global trade conditions amid US tariff escalation.

Russia’s Central Bank kept its key rate at 21%, consistent with forecasts. It said domestic demand is outpacing supply, but inflationary pressures are easing. Policymakers aim to keep a tight stance through 2026 to meet their inflation target.

Poland’s National Bank held at 5.75%, while Hungary’s National Bank maintained its rate at 6.5%. Both decisions were expected and reflected caution amid persistent core inflation and an uncertain global climate.

Select easing from ECB, New Zealand, India

The European Central Bank broke ranks by cutting its three main rates by 25 basis points. The deposit rate fell from 2.5% to 2.25%, while the main refinancing and marginal lending rates dropped to 2.4% and 2.65%, respectively. President Christine Lagarde cited a worsening trade outlook and said growing global uncertainty is weighing on eurozone exports.

New Zealand’s central bank followed suit, cutting its rate to 3.5% as inflation expectations remained within target. It also flagged trade frictions and global uncertainty as risks to growth.

India’s Reserve Bank cut its repo rate by 25 basis points to 6% – its second reduction since 2020 – extending its easing cycle that began in February.

Türkiye raises rates sharply amid inflation pressures

In contrast, Türkiye’s Central Bank hiked its one-week repo rate by 350 basis points to 46%. It also raised its overnight lending rate to 49% and borrowing rate to 44.5%. The bank cited persistent services inflation and slightly higher monthly core inflation, while noting that global trade frictions factored into the decision.

Despite signs of slowing domestic demand, the bank said inflation risks remain elevated and could hinder disinflation efforts. Its next policy decision is set for June 19.