Do Upcoming Central Bank Decisions Lean Toward Easing or Tightening?

As November 2025 draws to a close, one message rings out loud and clear across global markets: the multi-year monetary easing cycle that reshaped finance is reaching its true end. What only months ago looked like “continued cutting” has now become “one last cut” or “extended pause” for most major central banks. Some are already preparing for renewed tightening. This pivot is happening faster and more decisively than almost anyone forecasted mid-year, driven by stubbornly persistent inflation, still-robust labor markets, and renewed rises in energy and commodity prices.

The Federal Reserve and the Bank of Canada remain the only two still actively cutting, but even their moves have become smaller and more hesitant. The Fed is widely expected to deliver one final 25 bps cut in December — its third and likely last of 2025 — before settling into a prolonged hold throughout 2026. The U.S. dollar continues to hold its position as the strongest major currency, supported by positive interest-rate differentials and economic data that remains solid. The Bank of Canada, by contrast, is easing more aggressively due to clear signs of slowing growth and a cooling housing market, keeping the Canadian dollar under persistent downward pressure against its U.S. counterpart and other commodity currencies.

In Europe and the developed world more broadly, the picture has shifted dramatically. The European Central Bank has ended its rapid-fire cutting sequence and moved firmly into wait-and-see mode, with inflation still above target in key services sectors. The Bank of England faces a genuine dilemma after November’s expansionary UK budget; its most recent vote was a razor-thin 5-4 to hold rates, leaving the next move hanging between a possible February cut or a longer pause. Sterling has been swinging violently and has lost upward momentum. The Reserve Bank of Australia stands out as the most hawkish of the bunch, refusing to even contemplate near-term easing amid a still-red-hot housing market, making the Aussie dollar one of the best-performing major currencies this year. The Swiss National Bank has been parked at 0% since June and shows no intention of moving anytime soon, keeping the Swiss franc as a quiet safe-haven favorite.

The one striking exception is the Bank of Japan, which continues to march in the opposite direction. It remains the only major central bank in genuine tightening mode and may deliver another 25 bps hike as soon as December or January, propelled by an ultra-weak yen and inflation that has now exceeded target for many consecutive months. The Japanese yen is the sole G10 currency enjoying genuine, sustained appreciation at present and is steadily clawing back losses accumulated over the past decade.

The big-picture takeaway is unmistakable: the era of ultra-cheap money and abundant liquidity is effectively over. Markets will have to adapt to a higher “neutral” rate environment, which implies ongoing pressure on overvalued equities, higher bond yields, better opportunities in fixed income, and fresh challenges for both sovereign and corporate debt loads. Instead of the 100–150 basis points of combined cuts from the Fed and ECB that were widely expected for 2026 just a few months ago, the new consensus points to only 50–75 bps — and possibly even less.

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