LONDON, U.K.: The world's leading central banks have delivered their most aggressive round of interest rate cuts in more than a decade in 2025, reversing the inflation-fighting stance of recent years as price pressures eased and growth concerns resurfaced.
Nine of the central banks overseeing the 10 most heavily traded currencies have cut benchmark rates this year, including the U.S. Federal Reserve, the European Central Bank, and the Bank of England, as well as Australia, New Zealand, Canada, Sweden, Norway, and Switzerland.
Together, they delivered 850 basis points of easing through 32 rate cuts — the highest number of reductions since 2008 and the most significant cumulative easing since 2009.
The shift marks a sharp turnaround from 2022 and 2023, when policymakers rapidly raised borrowing costs to curb surging inflation following Russia's invasion of Ukraine and the resulting spike in energy prices.
Japan stood apart in 2025, raising interest rates twice. Some economists say the pace of easing may slow in 2026, with several major central banks already adopting a more cautious tone. Canada and Australia, in particular, have begun signalling that rate hikes could re-enter the conversation.
"We think the ECB will hike next year and the RBA and BOC will get close to it," said James Rossiter, head of global macro strategy at TD Securities.
In the United States, analysts say the Federal Reserve faces a more complex outlook shaped by shifting labour market and inflation trends.
"During the course of 2025, we had this dynamic of the Fed in every meeting, either going to stay put or cut; we were never discussing hikes," JPMorgan's head of global macro research, Luis Oganes, said.
"But during the course of 2026 that's probably going to change, and particularly in the second half of the year, you're going to have a little bit more of a two-sided risk."
Signs of cooling momentum were already visible in December. Of the nine major central banks that held meetings this month, only the Fed and the Bank of England cut rates, while Japan tightened policy.
In contrast, rate cuts across developing economies continued at a rapid pace. Eight central banks from a Reuters sample of 18 emerging markets — of which 14 met in December — delivered a combined 350 basis points of easing. Those included Turkey, Russia, India, Mexico, Thailand, the Philippines, Poland, and Chile.
That brought the total easing by emerging markets in 2025 to 3,085 basis points across 51 rate cuts, surpassing the 2,160 basis points delivered in 2024 and marking the largest easing cycle since at least 2021.
"You had inflation being kept under control, much more so than even in developed markets, with a much more proactive set of policy makers," said Giulia Pellegrini, managing director at Allianz Global Investors.
Emerging markets also recorded 625 basis points of rate hikes this year, less than half the tightening seen in 2024.
Analysts expect the easing trend in developing economies to continue.
"You still have a lot of EMs that could and would and should either start their cutting cycle, in the case of Brazil, perhaps Hungary, but some others that can extend their cutting cycle," said Elina Theodorakopoulou, managing director at Manulife Investment Management.
