Easy money

The Fed is expected to cut rates on Wednesday and change its policy stance to dovish, pending confirmation that inflation is under control, even if it’s not exactly at 2%. But that’s not the only central banks that’s easing: as you can see in the table below, most central banks are on a cutting spree. Among G10 economies, there has been 17 rate cuts so far in 2025, with New Zealand and the ECB being the most aggressive (100 and 75 bps respectively). When we expand into non G10 economies, the count adds to 27 rate cuts YTD. And that only counts the action, not the magnitude of the cuts. Liquidity is flowing into financial assets, pushing prices up. It’s also weakening currencies, in a killer combination with global debt. It looks like the world will default on its debt through repression, paying coupons and principal in weaker currencies. It’s difficult to justify owning bonds if this scenario is confirmed.

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