Central banks slash rates like it’s 2008 all over again
The era of higher interest rates appears to be fading fast, as central banks around the world pivot sharply toward monetary easing at the fastest pace since the 2008 financial crisis — underscoring a renewed push to support economic growth even as inflation risks linger.
Global central banks have cut policy rates 312 times over the past 24 months, marking the second-highest total in at least 25 years, according to data from Bank of America Global Research. That figure is just one rate cut shy of the 313 cuts made in the two years following the global financial crisis.
Roughly 82% of the world’s central banks have lowered rates in the past six months, with the U.S. Federal Reserve joining the wave in September.
“This century, central banks have slashed rates at a pace only seen during recessions,” wrote The Kobeissi Letter, a market commentator.
The coordinated effort suggests policymakers are preemptively cushioning their economies against rising defaults, weaker consumer spending, and a potential downturn.
However, the rate-cutting spree is not without controversy: it comes as many advanced economies are still grappling with persistent inflation and elevated prices.
Some analysts warn that central banks may be quietly preparing the public to tolerate slightly higher inflation as the new normal, which is a trade-off for sustaining growth and avoiding a deeper global slowdown.
Getting used to higher inflation
In a recent editorial, The Wall Street Journal’s Editorial Board argued that there appears to be a clear mandate from the White House to declare victory on inflation, more than a year after Federal Reserve Chair Jerome Powell made a similar, and arguably premature, claim.
The Trump administration has been vocal in its push for lower interest rates, with the president himself calling for the largest rate cuts in history, in part to keep pace with global central banks easing policy.
The challenge, however, is that consumer inflation has accelerated in recent months and is back at 3%, still well above the Fed’s 2% target.
If inflation remains at 3%, the value of a U.S. dollar today would fall to just 73.74 cents in a decade, The Journal’s Editorial Board warned, a reminder that even modestly higher inflation can quietly erode purchasing power over time.
Despite that risk, investors remain confident that the Federal Reserve will continue cutting interest rates this year, even as inflation stays above target.
In fact, as InvestorsObserver reported, options traders are increasingly betting that the Fed could deliver a stealth 50-basis-point rate cut at one of its next two policy meetings — at least, that’s what open interest in the SOFR call options market suggests.