The Rate Cycle Turns: Policy-Rate Paths of Six Major Central Banks Since 2008 – and What Markets Expect Next

The energy-price shock triggered by the war in the Middle East has turned global monetary policy on its head: inflation had risen clearly above target in the spring and eased in June (euro area: 2.8% in June, down from 3.2% in May; US: headline CPI 3.5% in June, down from 4.2% in May — in both cases mainly on falling energy prices). In July the two blocs diverged: the euro area edged back up to 2.9% as energy prices re-accelerated (Eurostat flash estimate, 31 July 2026), while the US eased further to 3.4% (BLS, 12 August 2026). At the same time, growth is cooling. The global rate-cutting cycle of 2024/25 has nonetheless effectively come to an end. The ECB made the first move: on June 11, 2026 it raised the deposit facility rate by 25 bp to 2.25% (effective June 17), becoming the first major Western central bank to reverse its easing cycle. The Bank of Japan followed, raising its policy rate to 1.00% on June 16 — the highest level since September 1995. The Fed (June 17), the Bank of England and the SNB (both June 18), by contrast, kept their rates unchanged, as did the Bank of Canada (June 10 and again July 15, its sixth consecutive hold). The result is a degree of monetary-policy divergence rarely seen in recent years.

Where the Central Banks Stand Today

18 Years of Monetary Policy in One Picture: All Rate Changes Since 2008

The chart shows policy-rate paths as step lines — each step is a rate change; meetings without a rate change are not plotted. Clearly visible: the synchronized collapse during the 2008/09 financial crisis, the decade of zero and negative rates, the historically steep 2022/23 tightening cycle against the inflation wave, the 2024/25 easing cycle — and the current plateau, from which the ECB and the BoJ were the first to turn upwards again in June 2026.

What Markets and Economists Expect Now

Expectations have shifted dramatically since the outbreak of the war in late February 2026: as recently as February, markets were still pricing further rate cuts for 2026 almost everywhere — those bets have since been largely unwound. The ECB reversed its easing cycle on June 11 (its first hike since the cycle ended), while the BoJ continued the normalisation it began in March 2024 with its step to 1.00% on June 16.

The Drivers Behind the Expectations

• Energy shock & inflation: After the escalation in the Middle East energy prices rose sharply; in June they fell back and eased headline inflation for the first time (euro area energy +8.5% year-on-year, down from +10.8% in May), but in July energy re-accelerated to +10.0% and lifted euro-area headline inflation back to 2.9%; the core rate excluding energy, food, alcohol & tobacco rose to 2.5% from 2.4% (Eurostat flash estimate, 31 July 2026). Inflation remains above target in the US (headline CPI 3.4% in July, down from 3.5% in June, core 2.5%, down from 2.6%; despite a 1.5% monthly fall the energy index is still 14.7% above a year earlier — BLS, 12 August 2026; the Fed primarily targets the PCE index; the August CPI is due on 11 September 2026), the euro area (2.9% in July) and the UK (2.6% in June, down from 2.8% in May; BoE projection: just under 3% in Q3, a little over 3¼% in Q4). Oil rose further in August — Brent traded at around US$89 on 14 August 2026, up from around US$85 in mid-July; the energy path remains the central source of uncertainty.
• Stagflation dilemma: At the same time, economies and labour markets are cooling — central banks have to weigh fighting inflation against supporting growth. Canada has met the technical-recession definition, largely amid tariff-related uncertainty, although the BoC cautions against over-interpreting single GDP prints.
• Hawks on the rise: Dissenting votes are piling up: Fed 8-4 in April — four dissents for the first time since October 1992, with one member preferring a 25 bp cut while three supported the hold but objected to the easing bias in the statement. In addition, BoE 8-1 (Chief Economist Pill voting for +25 bp), BoJ 6-3 (three members calling for an immediate hike). Splits like these often precede changes in direction.
• Special cases: The SNB’s problem is less inflation (0.5% forecast for 2026) than safe-haven inflows into the franc, prompting FX-market interventions. At the Fed, the leadership transition adds uncertainty about the future reaction function: Powell’s term as Chair ended on May 15, 2026; his successor Kevin Warsh (in office since May 22, 2026) chaired the FOMC for the first time on June 17, delivered a unanimous hold (12–0) and sharply shortened the statement.

The Six Paths in Detail

Methodology & Sources

• Rates shown: Fed = upper bound of the federal funds target range (single target before Dec 2008). ECB = deposit facility rate, by effective date. BoE = Bank Rate. BoC = target for the overnight rate. BoJ = policy-rate equivalent following market convention (2010–2013 target band of 0–0.1%; 2013–2016 QQE without an explicit rate target; 2016–2024 negative rate applied to part of excess reserves). SNB = SNB policy rate; before June 2019 a simplified representation of the 3-month-Libor target range (communicated target), with the negative rate shown from its effective date of Jan 22, 2015.
• Special case, ECB October 2008: The coordinated emergency cut (Oct 8, 2008) was followed on Oct 9, 2008 by a technical narrowing of the rate corridor (+50 bp on the deposit rate) — both official dates are shown.
• Date convention: Dates refer to the announcement date of the decision; for the ECB, to the official effective date. Bank of Canada changes have taken effect on the day after the announcement since 2021.
• Official vs. market data: Policy-rate histories are taken from official central bank sources and are stable. Market-implied probabilities (CME FedWatch, OIS, prediction markets) and poll figures are fleeting and valid only as at the observation date stated; where no precisely dated source is available, they are deliberately phrased qualitatively (“widely expected”).
• History: official central bank sources — Fed Open Market Operations, ECB Key Interest Rates, BoE Bank Rate database, BoJ MPM, SNB decisions, BoC key interest rate.
• Central bank decisions & market expectations (as of August 16, 2026): delivered decisions — BoC Jun 10 (hold 2.25%), ECB Jun 11 (+25 bp to 2.25%, effective Jun 17), BoJ Jun 16 (+25 bp to 1.00%, vote 7–1), Fed Jun 17 (hold 3.50–3.75%, 12–0, first meeting under Warsh), BoE Jun 18 (hold 3.75%, 7–2), SNB Jun 18 (hold 0.00%), BoC Jul 15 (hold 2.25%, 6th consecutive hold; next meeting Sep 2, MPR Oct 28), ECB Jul 23 (hold 2.25%), Fed Jul 29 (hold 3.50–3.75%), BoE Jul 30 (hold 3.75%, 6–3), BoJ Jul 31 (hold 1.00%, 8–1) · Inflation: US CPI June 3.5% (BLS, Jul 14, 2026), euro area HICP June 2.8% final (Eurostat, Jul 17, 2026), euro area HICP July 2.9% flash (Eurostat, Jul 31, 2026), UK CPI June 2.6% (ONS, Jul 2026) · CME FedWatch (Fed July hike odds after the June CPI ~8–15%, cf. CNBC, Jul 13, 2026), J.P. Morgan 2026 Mid-Year Outlook (Fed on hold in 2026), Reuters/Bloomberg economist polls from June/July 2026.
• Market-implied probabilities (FedWatch, OIS, prediction markets) are volatile from day to day and may shift considerably ahead of the September meetings.
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