Central Banks Recalibrate As Big Policy Easing Fizzles

Six months ago, the world's major central banks were primed for a move that anyone with a credit card or hoping to buy a home or run a business would cheer: A global shift to lower interest rates that would make borrowing cheaper and loans more available across the board, reported Howard Schneider and Francesco Canepa for Reuters.

Some modest steps have been made, including initial cuts this month by the European Central Bank (ECB) and the Bank of Canada (BOC). I Photo: 方畢可 Wikimedia Commons

"Rate cuts are 'a topic of discussion out in the world and also a discussion for us,'" Federal Reserve Chair Jerome Powell said in a press conference last December, when the mood among investors was giddy over the prospect of looser financial conditions, and organizations like the International Monetary Fund (IMF) worried that Powell and company would jump the gun, cut rates too fast, and undermine efforts to tame inflation.

Those fears were misplaced, it turns out.

The joint easing of monetary policy that appeared imminent at the end of 2023 has largely fizzled as major central banks confronted inflation that proved more persistent than expected, and economic and wage growth that proved more resilient.

Some modest steps have been made, including initial cuts this month by the European Central Bank (ECB) and the Bank of Canada (BOC).