Two years ago, central banks around the world were engaged in a battle against high inflation that resulted in an aggressive and synchronized jump in interest rates. Nowslotland, many policymakers are reversing course — but in a less coordinated way as price increases slow at different paces in various countries.
Central bankers in some emerging markets began cutting rates last year. European officials started a slow and cautious easing of interest rates just a few months ago. The biggest outlier had been the Federal Reserve, which had kept rates high for more than a year and throughout the summer. On Wednesday, it joined the crowd and cut rates — in a big way — for the first time since the early days of the pandemic.
“A few months ago, we were still in the space of American exceptionalism,” said Katharine Neiss, an economist at PGIM Fixed Income, an asset manager. There was the expectation that the resilience of the U.S. economy would lead to higher rates for longer, she said. “That was creating a lot of stresses and strains for the rest of the world,” she added.
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