The largest central banks worldwide are beginning to reverse a historic run of rate increases, but the path downward for borrowing costs will differ significantly from the upward trajectory.
Banks on both sides of the Atlantic are likely to move with the least amount of frequency and pauses out of concern that extremely low unemployment can spark inflation rates that are still higher than their targets.
The ultimate low point for interest rates is expected to be far higher than the record lows of the previous ten years, and significant changes in the world economy may cause borrowing costs to rise for some time.
Post-pandemic supply restrictions and rising energy prices resulting from Russia’s war in Ukraine have led to central banks hiking interest rates in late 2021, pushing inflation into double digits in several parts of the world.
Prices and inflation are expected to be slightly above or already at goal this year—2% for the majority of large economies—thanks to this seemingly coordinated response.