With key central banks now aligned in cutting interest rates, a real-time experiment is underway in how much the global financial landscape has changed since the pandemic and in particular whether the easing cycle may be short-lived because of higher underlying rates.
The impact of the Federal Reserve last week joining a process already started at the European Central Bank, the Bank of England and elsewhere with a larger-than-anticipated half-point rate cut could be extensive — already credited by some analysts for clearing the way for the People's Bank of China to unveil its largest stimulus since the pandemic with fewer concerns about how that might influence local currency values.
But how long and how far the global easing may continue remains unknown as policymakers explore whether the rates required to keep inflation in check and economies growing are higher now than the ultra-low ones common before the pandemic.
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