The Organization for Economic Co-operation and Development (OECD) has announced that the era of interest rate cuts in leading economies is expected to come to an end next year. This projection indicates that major central banks will have limited capacity to further loosen monetary policy amid current economic conditions.
According to the OECD, many of the world's largest economies have already lowered their interest rates significantly in recent years to support growth and combat inflation. However, with rates approaching historically low levels, central banks now face constraints that hinder further reductions.
The OECD's report emphasizes that the scope for additional monetary easing is shrinking, especially as inflationary pressures persist in several regions. This situation suggests that policymakers may need to shift their focus from monetary policy to other measures to sustain economic growth.
Experts warn that the end of rate cuts could lead to a period of stabilization or even tightening in some economies, which might impact borrowing costs, investment, and consumer spending. The report also highlights that the limited room for maneuver could pose challenges for economic recovery efforts, particularly in countries still recovering from recent downturns.
Furthermore, the OECD notes that central banks in advanced economies have already exhausted much of their policy tools, and future adjustments may require more targeted approaches. The group signals that the major central banks, including the Federal Reserve, European Central Bank, and Bank of Japan, will likely maintain their current rates for the foreseeable future.
Overall, the OECD's outlook suggests a cautious approach to monetary policy in the coming year, with policymakers needing to explore alternative strategies to support economic stability and growth amid constrained room for rate adjustments.