Despite import tariffs and robust economic growth, US inflation barely eased this year. In September, it stood at 3.0%, slightly above December 2024’s 2.9%. This explains why the Fed only began cutting rates after labour market weakness emerged in the summer. In the eurozone, inflation has slowed to the 2% target, prompting the European Central Bank (ECB) to pause rate cuts since June. In the UK, disappointing growth combined with stubborn inflation has kept the Bank of England’s policy rate at 4%. Meanwhile, the People’s Bank of China has taken only limited steps to combat deflation through rate cuts.
"}},{"componentType":"sectionTitle","title":"ECB Hits Pause Button"},{"componentType":"paragraph","richBody":{"value":"Most major central banks—except the Bank of Japan and the ECB—are expected to keep easing policy in 2026, effectively “opening the monetary taps”. The ECB is unlikely to move rates next year, given low growth and stable inflation near 2%. Should inflation accelerate or fall further, the ECB retains full flexibility to act.
"}},{"componentType":"sectionTitle","title":"Bank of Japan to raise interest rates"},{"componentType":"paragraph","richBody":{"value":"The Bank of Japan is expected to increase its policy rate by 0.25% to 0.75% in December 2025. In the final quarter of 2026, it is anticipated to raise rates by a further 0.25% to 1% to combat persistently high inflation. Together with the planned fiscal stimulus package from the new Prime Minister Takaichi, this is likely to push yields on Japanese government bonds even higher.
"}},{"componentType":"sectionTitle","title":"Fed to Cut Further—Trump Adds Uncertainty"},{"componentType":"paragraph","richBody":{"value":"We expect the Fed to deliver another 0.25% cut in December, bringing the policy rate to 3.75–3.50%. As of 1 December, markets are pricing in a probability of more than 80% for a 0.25% cut. For 2026, we forecast further cuts to 3.25–3.00%, which could mark the floor until late 2027.
Risks remain. Import tariffs and Trump’s planned fiscal stimulus could push inflation higher, forcing the Fed to cut less aggressively. Adding to the uncertainty: Fed Chair Jerome Powell’s term ends in May, and Trump will appoint a successor. Given Trump’s strong preference for lower rates, the new chair is expected to push for further easing.
"}},{"componentType":"sectionTitle","title":"China: Focus on Domestic Consumption"},{"componentType":"paragraph","richBody":{"value":"Finally, we expect only modest rate cuts by the People’s Bank of China in 2026 to support growth. Unlike previous cycles, these measures will focus on boosting domestic consumption rather than large-scale infrastructure projects.
"}},{"componentType":"linkList","iconTitle":{"title":"Read more"},"textLinks":[{"url":"/en/personal/investing/market-news-and-views/investment-outlook-2026-home","text":"Investment outlook 2026: Homepage"},{"url":"/en/personal/investing/market-news-and-views/investment-outlook-2026-fixed-income","text":"Investment outlook 2026: Fixed Income"},{"url":"/en/personal/investing/market-news-and-views/investment-outlook-2026-opportunities","text":"Investment outlook 2026: Opportunities"},{"url":"https://assets.ing.com/m/7dfc82cb56e72468/original/Investment-Outlook-2026.pdf","text":"Investment Outlook 2026: Download PDF"}]},{"componentType":"sectionTitle","title":"Good to know"},{"componentType":"paragraph","richBody":{"value":"Investing involves risks and costs. The value of your investment may fluctuate. Past performance is no guarantee of future results. Read more about the risks of investing .
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