Headlines
Big central banks signal rate-cut cycle is ending
Published by Global Banking and Finance Review
Posted on December 19, 2025
4 min readLast updated: January 20, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on December 19, 2025
4 min readLast updated: January 20, 2026
Central banks in major economies signal the end of the rate-cut cycle, with changes in monetary policies impacting global markets.
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)
A central bank is a financial institution that manages a country's currency, money supply, and interest rates. It oversees the banking system and implements monetary policy to stabilize the economy.
Monetary policy refers to the actions taken by a central bank to control the money supply and interest rates in an economy. It aims to achieve macroeconomic objectives such as controlling inflation and promoting employment.
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage. They are influenced by central banks and can affect economic activity and inflation.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. Central banks monitor inflation to guide monetary policy decisions.
The European Central Bank (ECB) is responsible for managing the euro and formulating monetary policy for the Eurozone. Its primary goal is to maintain price stability and support economic growth.
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