Major central banks deliver biggest easing push in over a decade in 2025

The Bank of Canada is seen in Ottawa. THE CANADIAN PRESS/Justin Tang

LONDON — Major central banks have delivered interest rate cuts in 2025 at the fastest clip and largest scale since the financial crisis, while easing among policymakers in developing nations also accelerated.

Nine of the central banks overseeing the 10 most heavily traded currencies lowered their benchmark lending rates in 2025 - namely the U.S. Federal Reserve, the European Central Bank and the Bank of England but also Australia, New Zealand, Canada, Sweden, Norway and Switzerland.

They delivered 850 basis points in easing across 32 rate reductions this year - the biggest number of cuts since 2008 and the biggest scale of easing since 2009.

Change in tone ahead of 2026

This marks a sharp reversal from 2022 and 2023 when policymakers ramped up rates to combat inflation as energy prices soared following Russia’s invasion of Ukraine.

Japan proved the exception this year, hiking rates twice.

Some analysts expect that 2026 might bring a sea change, noting that recent months had already seen a distinct change in tone from several G10 central banks, especially Canada and Australia, raising the specter of rate hikes to come.

“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.

The Fed meanwhile faces changing cross currents of labor market and inflation dynamics.

“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.”

The slowdown in easing momentum also became apparent in monthly data. Of the nine central banks that met in December, only the Fed and the Bank of England cut rates and Japan hiked.

Across developing nations, rate cuts still came hard and fast in December.

Eight central banks from a Reuters sample of 18 developing economies of which 14 held meetings this month, delivered 350 bps of cuts - Turkey, Russia, India, Mexico, Thailand, the Philippines, Poland and Chile.

That latest push took the annual 2025 tally of cuts in emerging economies to 3,085 bps of easing across 51 moves - well outstripping the 2,160 bps delivered in 2024 and the biggest easing effort since at least 2021.

Inflation ‘under control’

“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.

In the other direction, emerging markets also saw 625 bps of hikes since the start of the year, less than half the 1,450 bps delivered in tightening in 2024.

Analysts expect more easing from developing economies.

“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 Manulife Investment Management managing director Elina Theodorakopoulou.

(Reporting by Karin Strohecker and Sumanta Sen; Additional reporting by Libby George; Editing by Dhara Ranasinghe and Alison Williams)