A tariff headache for major central banks

By Yadarisa Shabong and Alun John

LONDON (Reuters) - U.S. President Donald Trump's tariffs have darkened the global economic backdrop, forcing big central banks to reassess their next steps.

Policymakers outside the United States now look more likely to cut interest rates than they would have done otherwise - or in Japan's case raise them less.

The U.S. Federal Reserve is in a tricky position.

Here's a look at where 10 developed-market central banks stand.

1/ SWITZERLAND

The Swiss National Bank does not meet until June, but it will be an interesting one, as markets expect it to cut rates to zero from 0.25%.

The SNB says it would rather not go further and return to negative rates, but a surging Swiss franc is hurting an export-heavy economy and could push Switzerland into deflation.

The franc is the best performing developed market currency since Trump's April 2 tariff announcement. The SNB's other oft-used policy tool, intervening to weaken the franc, could provoke the Trump administration, which says currency manipulation was one of the motivations for its tariffs.

2/ CANADA

The Bank of Canada held rates at 2.75% on Wednesday - its first pause after seven consecutive cuts - saying it wanted more information on the impact of tariffs.

Governor Tiff Macklem said uncertainty made it difficult to make economic predictions, noting: "Forecasts for economic growth are of little use as a guide to anything."

Still, traders bet on possibly two more cuts by year-end.

3/ NEW ZEALAND

The Reserve Bank of New Zealand cut its key rate by 25 basis points to 3.5% last week, with a total of 200 bps of easing since August.

New Zealand is exposed to China, leaving it at risk of damage from a sustained China-U.S. trade war. Markets expect roughly three more cuts this year, even though data Thursday showed higher-than-expected inflation.

4/ SWEDEN

Sweden left rates at 2.25% in March and expects to keep them at this level for now.

Its Riksbank had been in the dovish camp, easing rates from 4% to support a sluggish economy, but markets agree with policymakers that further cuts are unlikely.

5/ EURO ZONE

The European Central Bank cut interest rates for the seventh time in a year on Thursday and hinted more easing could follow.

It said the growth outlook had deteriorated due to rising trade tensions, and the volatile market response would likely cause financial conditions to tighten.

The ECB's key rate now 2.25% and markets currently see two or three more 25 bps cuts this year.

6/ UNITED STATES

The Fed has a dilemma since it expects tariffs to both lower economic growth and push inflation higher.