Central Banks Hiked and Cut Equally in May, Ending Global Easing Cycle
In May, 26 of 52 central banks raised rates while 26 cut, ending a two-year stretch where cuts outnumbered hikes. The last such balance occurred in early 2021, followed by three years of tightening. Recent ECB and BOJ rate increases suggest a new global tightening cycle.
According to the source, May marked a turning point in global monetary policy: among 52 central banks worldwide, exactly 26 raised rates and 26 cut rates. This ends a two-year period in which more central banks were cutting than raising each month.
A comparable situation last occurred in early 2021, after which three years of restrictive policy followed. The extreme of this cycle came in mid-2022, when 28 more central banks hiked than cut.
Recent actions reinforce the shift: the European Central Bank raised its key rate by 25 basis points to 2.25% last week, its first hike since September 2023. On Tuesday, the Bank of Japan also increased rates by 25 basis points to 1.0%, the highest level since 1995. The source concludes that a global tightening cycle appears to be beginning.
Source: The Kobeissi Letter