Tiny bank
iStockphoto/Manoj Madusanka

Heightened policy uncertainty has many of the world’s major central banks on the sidelines for now, says Moody’s Ratings in a new report on Monday.

The rating agency said that global central banks have shifted into “wait-and-see mode” amid ongoing policy uncertainty emanating from the U.S.

Last week, the U.S. Federal Reserve held rates steady, as did the central banks in the U.K., Indonesia, Japan and South Africa, it noted.

“Central bank decisions… reflected careful calibration as policymakers navigate the fallout and heightened global uncertainty from U.S. President Donald Trump’s rapidly evolving trade policy announcements,” it said.

In the current environment, U.S. growth forecasts are facing downward revisions and inflation estimates are rising, it noted — which has shifted rate expectations too.

“Importantly, eight of the FOMC’s 19 members expect no rate cuts or only easing by 25 basis points by year-end, up from four members in December,” Moody’s noted.

“All in all, the Fed appears to be comfortable holding rates where they are for now, but anticipates cuts later this year,” it said.

Against this backdrop, monetary policy changes are likely to be gradual in other markets too.

Moody’s said that it expects the Bank of Japan to continue gradual policy normalization and the Bank of England to also move cautiously in the face of sticky inflation, despite weaker growth.

The central banks of Indonesia and South Africa are likely to be cautious alongside the Fed, it noted.