All G10 central banks will hold their monetary policy meeting in June except for the Australian and New Zealand Reserve Banks. Expectations for the outcome of those meetings differ from one central bank to the other but, independently of the rate decision in June, those meetings will be the opportunity for central bankers to communicate on their assessment of the tariff impact on growth, inflation, and rate dynamics.

The US Federal Reserve is likely to announce a status quo on its key rate (18/06), extending the wait-and-see stance it adopted since President Trump took office on 20 January. The US economy has decelerated this year compared to its robust growth in 2024, yet it continues to expand, and the labour market—one of the two pillars of the Fed’s dual mandate—shows no signs of losing momentum. In the meantime, the other part of the Fed’s mandate, inflation, has been on a slowing trend until the impact of the tariffs feed through actual consumer prices. However, the inflation rate remains above the Fed’s 2% target and tariffs will likely fuel a rebound in inflation in the months ahead. This configuration warrants a continuation of the “wait-and-see” stance adopted by the Fed this year: as long as economic growth stands firm and inflation risks are tilted to the upside, holding to the current mildly restrictive monetary policy makes sense. If (or when) economic data shows no long-lasting inflationary impact from tariffs beyond the short-term mechanical effect or signs of a proper economic growth slowdown and labour market deterioration appear, the Fed will likely resume rate cuts to bring its monetary policy stance toward a neutral level. In that respect, the most interesting part of the 18 June meeting will certainly be the update in Fed’s GDP growth, employment and inflation forecasts, along with the update in Fed’s members projections for rates (the “dot plot”). They will provide insightful indications of the Fed’s assessment of likely future economic developments and potential path for USD short-term rates.

The European Central Bank will likely cut its key deposit facility rate by another 25bp when it meets this week (5/06), extending the interest rate cut cycle initiated a year ago. This would bring the ECB deposit rate down to 2%, a level deemed neutral in terms of its impact on growth and inflation dynamics. The ECB will also update its growth and inflation forecasts, which will give indications on the prospect for ECB rates in the second half of the year and beyond. If inflation continues to be expected to stabilise around the 2% target while GDP growth prospects are improving with the help of supportive fiscal policy in Germany, the case for additional monetary policy easing after the June rate cut might be less straightforward and the ECB could possibly put an end to its rate cut cycle in the second half of the year. As for the Fed, the update in economic projections and the communication will probably be more important than the rate decision itself.

Only the ECB and the SNB are expected to cut rates in June, but markets expect the global rate cut cycle to extend during the second half of the year

The dynamic of the US economy remains under scrutiny after a soft start of the year and the tariff shock of April. Sentiment surveys had been under pressure during the first quarter and further deteriorated in April, but generally rebounded in May, suggesting that the US economy is withstanding the tariff shock relatively well so far. In parallel, actual data on economic activity and inflation released so far cannot be conclusive in assessing the real impact of tariffs on consumption, business spending and consumer prices, and the release of May data in June will provide a first indication of the post-tariff growth dynamic in the US. Nowcasting models suggest resilient economic growth, with the Atlanta Fed’s GDPNow hinting at 3.8% GDP growth for the second quarter; however, the data released in the coming weeks will be key to adjust this estimate.

Real-time estimates of US GDP point to a robust growth in Q2 (far from the sharp slowdown feared by some in April)

With the job market remaining the main driver of households’ consumption, employment-related data released in the first week of June will be closely watched for any sign of a hiring slowdown that could have been caused by the tariff uncertainties. The JOLTS report on job opening, layoffs and quits for the month of April (3/06), the ADP survey on employment in the private sector for May (4/06) and the Challenger Job Cuts survey of layoffs for May (5/06) will be of interest in this context. But the most important on the labour market front will be the Employment report for May (6/06), including the evolution of nonfarm payrolls, the unemployment rate and wages. Weekly jobless claims released every Thursday will also be useful in providing a “real-time” pulse of the US labour market.

Consumption spending is by far the largest and main driver of US GDP growth and retail sales (17/06) and personal spending (27/06) for May will be scrutinised, as well as industrial production (17/06) and durable goods orders (26/06) for business activity. Trade balance data for April (5/06) will also give an early glance at any inflexion in US external trade dynamics. In the meantime, with inflation being a major source of concern for consumers, CPI inflation (11/06), PPI inflation (12/06) and the PCE deflator (27/06) for the month of May will be key in assessing the impact of tariffs on prices. For reference, April inflation data remained muted but were probably too early to fully incorporate the impact of 2 April announcements.