Central bank scanner: Central banks winding up rate-cutting cycle

European Central Bank (ECB): 

• Recent action (February 5): No change in the policy rate. A surprisingly cool headline inflation print in January provided a point of interest, but President Christine Lagarde emphasized that a single data point does not change the forecast. The ECB maintains inflation will be just below 2% well into next year.  

• Upcoming (March 19): No change in the policy rate is expected. The ECB has wrapped up its rate-cutting cycle, barring unforeseen shocks. Policymakers are comfortable with the current policy rate but warn that shifting global trade policy and continuing geopolitical tensions limit visibility. 

Federal Reserve (Fed): 

• Recent action (January 28): No change in the policy rate. Two voting members dissented, opting for a 25-basis point cut. In recent meetings Stephen Miran voted for a 50-basis point cut; here he dissented for half that. The labor market is in a tricky balance where little job creation is enough to maintain equilibrium; in the last year only 15,000 jobs were created per month on average.   

• Upcoming (March 18): No change in the policy rate is expected. The jobless boom, happening while economic growth is strong, throws a curveball at the Fed’s dual mandate. Adding to the uncertainty, one-time hawk Kevin Warsh has been nominated to fill the Fed chair position when Jay Powell’s term ends in May. We expect three interest rate cuts in 2026, starting at the June meeting, though that’s a coin flip because it is expected to be Warsh’s first meeting as Fed chair.  

The economic narrative has to fully support a cut for Warsh to convince his colleagues as a new Fed Chair and to temper concerns markets may have about the Fed’s independence. Financial markets welcomed Warsh’s nomination; the next challenge will be to sustain the trust of market participants. The FOMC is a committee – Warsh’s job is to build a consensus, and that may require time, especially as debate about the Fed’s neutral fed funds intensifies in a world with AI. High productivity growth raises instead of lowers the neutral rate, as we saw in the late 1990s. Former Fed Chair Alan Greenspan raised rates, as productivity accelerated in the later part of the decade. Warsh was not at the Fed back then. 

Bank of Canada (BOC): 

• Recent action (January 28): No change in the policy rate. The unemployment rate fell to 6.5% in January, the lowest since September 2024, in part due to reductions in foreign work permits. Flash estimates of economic growth showed a slight contraction in the fourth quarter after two straight quarters of nearly flat growth. 

• Upcoming (March 18): No change in the policy rate is expected. Policymakers have indicated that if the economy continues to progress as forecast, then there will be no further cuts. Recent tariff threats from the US cloud policymakers’ outlook. The upcoming USMCA renegotiation will have a massive impact as nearly 80% of Canadian exports are destined for the US.  

Central Bank of Brazil: 

• Recent action (January 28): No change in the policy rate. The Selic sits at a restrictive 15%. Actual inflation and inflation expectations remain elevated but are on path to target.  

• Upcoming (March 17): The CBB is forecast to cut 25 basis points. Markets are pricing in a larger initial cut, but the central bank is likely to be hesitant to restart the cutting cycle with a large decrease. In 2023, the CBB started cutting rates only to reignite inflationary pressures. That prompted the hiking cycle that is nearing its end. 

Bank of Japan (BOJ): 

• Recent action (January 23): No change in the policy rate in an 8-1 vote. The December inflation print was the coolest in 15 months. Economic growth decelerated in the third quarter, marking the worst reading since the second quarter of 2024. 

• Upcoming (March 19): No change in the policy rate is expected. Long yields are still at the highest levels on record. Real yields remain near 0%. The BOJ is expected to increase the policy rate two more times by the end of 2027, likely beginning mid-year. 

Reserve Bank of India (RBI): 

• Recent action (February 6): No change in the policy rate in a unanimous decision. The US-India trade deal supports stronger future growth, giving the monetary policy committee room to hold rates.  

• Upcoming (April 9): No change in the policy rate is expected. Low inflation is headed towards the center of the RBI’s target range. The bank’s cutting cycle has likely concluded. 

Bank of England (BOE): 

• Recent action (February 5): No change in the policy rate in a 5-4 vote. Consumer prices posted the largest monthly increase since April 2025, erasing the cool print from November. Third and fourth quarter growth barely stayed in positive territory.  

• Upcoming (March 19): No change in the policy rate is expected. The BOE is divided; its recent decisions have come down to a single vote; however, a couple of members who voted to hold rates have indicated they would support a rate cut soon. Weak economic growth and a softening labor market will prompt easing. Two more cuts are expected this year, which is in line with market expectations. 

Bank of Mexico (Banxico): 

• Recent action (February 5): No change in the policy rate. That was the first meeting without a rate cut since mid-2024. Core inflation increased further above Banxico’s target range; services inflation drove that gain. 

• Upcoming (March 26): No change in the policy rate is expected. The stance of policymakers moved in the hawkish direction as concerns around core inflation proved justified. That likely leads to a pause, barring a sudden cooling of inflation. We expect two or three more rate cuts in this cycle. 

Reserve Bank of Australia (RBA): 

• Recent Action (February 3): The RBA hiked rates 25 basis points. Inflation jumped in the fourth quarter, topping consensus expectations. Some of the increase was due to temporary factors; however, capacity pressures have caused the RBA to upwardly adjust two-year forecasts for core inflation.  

• Upcoming (March 17): No change in the policy rate is expected. Downwardly revised growth forecasts will push the RBA to assess the restrictiveness of rates on growth and inflation. Price momentum is forecast to cool, prompting no further rate cuts through the end of the year. 

People’s Bank of China (PBOC): 

• Recent action (January 20): No change in the policy rate. GDP growth hit the official target of 5% but was carried by massive export growth as consumption and investment lagged. Export growth is a byproduct of manufacturing overcapacity which has pushed inflation to borderline deflationary territory. The excess manufacturing capacity that China is now struggling with is showing up as a major deflationary source for the global economy. The US is not immune, despite large tariffs that were levied on exports last year – there were tariff waivers and large carve outs for tech firms to ensure the tech sector could win what is seen as an arms race in AI. 

• Upcoming (February 20): The PBOC is forecast to gradually cut rates by the end of 2026 after a single 10-basis-point cut last year. Loan growth, though soft in 2025, was supported by fiscal easing. With that tailwind dissipating in 2026, the central bank may resort to rate cuts.  

Central Bank of Turkey (CBRT): 

• Recent action (January 22): The CBRT cut 100 basis points to 37% from 38%. That is down from a peak of 50% at the end of 2024. Inflation cooled over the course of 2025 giving policymakers room to cut.  

• Upcoming (March 12): The CBRT is forecast to continue cutting rates during 2026; the size of the cuts is in question. The January cut was smaller than consensus estimates. Policymakers emphasized that inflation risks to the upside means cuts are not assured.