Central banks extend easing cycle in November as uncertain 2025 looms

By Karin Strohecker and Sumanta Sen

LONDON (Reuters) – Monetary easing by central banks across developed and emerging economies trundled along in November with markets warily gearing up for a new year that could bring tectonic shifts to the global policy making backdrop.

Four of the six central banks overseeing the 10 most heavily traded currencies that held meetings in November lowered their lending benchmarks. Central banks in New Zealand and Sweden each shaved 50 basis points off their interest rates while the U.S. Federal Reserve and the Bank of England delivered 25 bps cuts.

Policy makers in Australia and Norway decided to leave interest rates unchanged, while their peers in Switzerland, Japan, Canada and at the European Central Bank held no rate setting meetings. 

The outcome of the U.S. election, which will see a return of Donald Trump to the White House on January 20, is expected to fuel fresh trade tensions that could boost U.S. inflation and curtail growth. 

The latest moves come ahead of some potentially sizeable shocks for the global economy, with politics set to become increasingly unpredictable, said James Rossiter, head of global macro strategy at TD Securities.

“The name of the game in 2025 is now uncertainty, especially in the U.S. and Europe,” said Rossiter. “Central banks are going to have to adapt their strategies quickly.”

The latest moves across G10 central banks brings the year-to-date tally of rate cuts to 650 bps, nearly matching the 2020 total of 655 bps, after major central banks delivered no cuts between 2021 and 2023.

Across emerging markets, 12 of the Reuters sample of 18 central banks in developing economies held rate-setting meetings in November. South Korea, Mexico, South Africa and the Czech Republic delivered 25 bps cuts each while China, Indonesia, Turkey, Malaysia, Israel, Hungary and Poland kept rates unchanged. 

Brazil extended its rate hiking cycle, lifting its key interest rates by 50 bps.

S&P Global Ratings emerging market chief economist Elijah Oliveros-Rosen said that a changing outlook of fewer rate cuts from the Fed in the wake of the U.S. election would shape policy making in developing economies. 

“We also expect greater caution among most major EM central banks, and we’ve therefore toned down our expectations for their interest rate cuts in 2025,” Oliveros-Rosen said in a note to clients. “On balance, we expect a stronger U.S. dollar against most EM currencies in 2025 than in 2024.”

The latest moves in emerging markets took the tally of cuts since the start of the year to 1,810 bps across 46 moves – outstripping the total of 1,765 bps of easing in 2022, after 945 bps in 2023.

Total (EPA:TTEF) hikes for emerging markets so far in 2024 stood at 1,350 bps.