With the fading echoes of the global inflation shock now receding, the trend towards lower borrowing costs seems poised to gain momentum as economies face another year of uncertainty.
The U.S. Federal Reserve has finally joined the global chorus of rate cuts, marking the beginning of a cautious descent. Yet, while inflation concerns have been temporarily subdued, attention is shifting towards more ominous clouds on the horizon: global growth worries.

While the Fed is now leading the charge on global monetary easing, the movement will likely become more widespread. Most G7 countries are on board; even holdouts like Norway and Australia are expected to join in eventually.
Yet significant uncertainties remain, including the upcoming U.S. election. Whether Donald Trump makes a return or Kamala Harris steps in, any resulting policies on tax, tariffs, and immigration would likely have profound effects on the U.S. economy and, by extension, the Fed’s approach.
Regardless of who’s in charge, we are entering a prolonged period of central bank activism, a sharp contrast to the recent long stretch of high rates.

Only three of the 23 institutions surveyed are expected to leave borrowing costs unchanged over the next three months, with all anticipated to make adjustments of some kind by the end of 2025. Even though monetary easing is the prevailing theme, countries like Japan and Brazil are likely to tighten policy, going against the grain.
The Fed’s half-point cut and China’s surprise stimulus package have shifted the central bank narrative from rate hikes designed to crush inflation to cuts aimed at boosting markets. The other wild card is the U.S. election, with Trump’s campaign promises on taxes, tariffs, and expulsions likely forcing the Fed to course-correct.

The FED Chairman slowed dance with Rate Cuts, paying again a game of wait and see. With his trademark measured calm, Powell clarified that while the U.S. economy remains solid footing, the Fed isn’t rushing to slash rates. Instead, it’ll happen “over time” as the economy continues to perform its little balancing act.
Reiterating his confidence that inflation will steadily march toward the Fed’s 2% target, Powell added that current economic conditions are “setting the stage” for a gradual easing of price pressures. But there’s no roadmap to follow. “If the economy evolves as expected, monetary policy will gradually shift to a more neutral stance,” Powell told an audience at the National Association for Business Economics’ annual gathering in Nashville. “But we’re not on a pre-set course,” he noted, warning that policymakers will keep relying on those ever-important data points at each meeting.

The Fed’s current interest rate, which was slashed to 4.75%-5% earlier this month, is still seen as restricting economic activity. That means investors are left wondering how quickly—or slowly—the Fed will lower rates in the months ahead. The Fed’s projections show another half-point cut for the rest of 2024 and an additional percentage point reduction in 2025.
Investors, meanwhile, are betting on about 75 basis points of further rate cuts this year, which implies another sizable cut in November or December. Several Fed officials, including Governor Michelle Bowman, have opened the door for more significant reductions if the job market falters. Bowman, who opposed the recent half-point cut in favour of a smaller quarter-point move, emphasised her concerns about lingering inflation risks. She’s urging a more “measured” pace for future cuts.

The story continues with no clear path and a divided FOMC.