Big central banks signal rate-cut cycle is ending

By Naomi Rovnick ‌and Alun John

LONDON, Dec 19 (Reuters) - Central banks in big economies are signalling a change of stance as the Bank of Japan raised interest rates to a 30-year high ‍on Friday. 

A day ‌earlier the European Central Bank all but confirmed it was done with monetary easing and the Bank of England cut rates in a narrow vote as dissenters cautioned about ⁠price pressures. 

Now all eyes are on how dovish the incoming next Federal Reserve will manage ‌to be after some of the U.S. central bank's policymakers warned the world's biggest economy might already be running too hot. 

Here's where central banks in 10 developed markets stand: 

1/ SWITZERLAND  

The Swiss National Bank left its policy interest rate unchanged at 0% on December 11, the lowest among developed-market central banks, and said the recent agreement to reduce U.S. tariffs on Swiss goods had improved the economic outlook. 

Even though Swiss inflation is ⁠at zero as the strong safe-haven franc lowers import costs, the bar for bringing rates into negative territory is high, and economists expect price growth to recover mildly next year and the SNB to stay on hold throughout 2026. 

2/ ​CANADA   

The Bank of Canada held its key rate at 2.25% last week, after 225 basis points of easing ‌this cycle. Governor Tiff Macklem said the economy was proving resilient to U.S. trade ⁠measures.

The BOC is expected to keep rates on hold until 2027, after government spending and robust oil exports lifted third-quarter growth to 2.6% and the labour market strengthened.   

3/ SWEDEN  

Sweden's Riksbank also expects previous monetary easing to begin lifting GDP growth and with year-on-year inflation running just above its 2% target, it held rates at 1.75% on December 18 and analysts anticipate ​it will hike again in late 2026. 

4/ NEW ZEALAND

With unemployment stuck at a nine-year high, turning hawkish will be a tough choice for new Reserve Bank of New Zealand boss Anna Breman. 

With a string of punchy rate cuts having helped propel inflation to the top end of the central bank's target range, however, money markets see New Zealand's cash rate nearing 3% by December 2026 from 2.25% currently.     

5/ EURO ZONE  

The European Central Bank has been firmly on hold at 2% since June and its latest pause on Thursday also came with upgrades ​to growth and ‍inflation forecasts. 

Traders settled on bets for a lengthy pause ​until at least June after ECB President Christine Lagarde cited heavy uncertainty and avoided forward guidance.

6/ UNITED STATES

The Federal Reserve cut rates on December 10, in a divided vote, then hinted at a pause. 

Delayed jobs data showed that the labour market had declined in October, then snapped back the following month and U.S. business leaders also expect further price rises from tariffs. 

Fed policymakers predict just one 25 bps cut in 2026, setting them up for potential clashes with President Donald Trump, who wants more easing, as does Fed Chair frontrunner and White House economic adviser Kevin Hassett. 

7/ BRITAIN

Bank of England rate-setters voted narrowly for a quarter-point cut to 3.75% on Thursday and Governor Andrew Bailey warned future easing was a close call. 

With UK inflation still the highest in ⁠the G7, comments from BoE dissenters on Thursday that it may get stuck too high drained confidence out of interest rate markets for more than one 25bps cut next year. 

8/ NORWAY   

The Norges Bank has been the most cautious in the G10 pack, having cut rates ​by just 50 bps this cycle. 

It held borrowing costs steady on Thursday, although futures markets anticipate 44 bps of further easing next year after inflation cooled off.

9/ AUSTRALIA

The Reserve Bank of Australia looks close to its turning point, having held rates steady at 3.6% earlier this month and issued a stark warning about inflation. 

Markets are fully pricing a hike by June. 

10/ JAPAN

The Bank of Japan raised rates to 0.75% on Friday and upgraded its growth and inflation forecasts, although the yen fell sharply while Japanese ‌government bond yields also spiked higher, sending mixed market signals about the likelihood of more hikes. 

Investors have been anticipating a BOJ shift away from economic support measures since new Prime Minister Sanae Takaichi pledged massive stimulus spending and as inflation remained strong enough to pile pressure on the central bank. 

(Reporting by Naomi Rovnick and Alun John, editing by Amanda Cooper and Alex Richardson)