Global | The pulse of monetary policy

Summary

After the fastest monetary tightening cycle in decades (2022-2023), the main central banks have begun a process of lowering interest rates, with the “last mile” characterized by a cautious approach.

Key points

• Key points:
• Post-pandemic inflation has eased, but normalization is taking place between financial volatility and geopolitical tensions. Protectionism, persistent core inflation, and economies at different speeds are keeping policymakers on guard.
• In the advanced economies, the ECB led the rate cuts and now appears to be closing the cycle, with inflation converging toward 2 %. The Fed is moving cautiously: inflation remains resilient and tariffs add pressure to prices. The Bank of England opts for a middle-of-the-road approach to the combination of low growth and high inflation, as Japan begins to emerge from its ultra-expansionary policy.
• In emerging economies, monetary easing is progressing with nuances. In Latin America, central banks maintained cuts during 2024 and 2025, albeit at different rates as disinflation slowed down because core inflation—especially in services—showed greater persistence.
• Looking ahead to 2026, monetary policy enters a more uncertain phase, marked by political risks and supply shocks. Normalization ceases to be a goal and becomes a continuously evolving process.

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