Central banks are preparing for inflation risks in 2026, but lack consensus on how to deal with them.
The word that best describes the state of the global economy on all continents is uncertainty. Business leaders feel this acutely, but nowhere is it more pressing than in the deliberations of central bankers. Monetary authorities operate in an environment where the trajectory of growth, trade and inflation is increasingly difficult to predict, requiring them to exercise caution. With divergent approaches and contrasting trends, it is in this climate of uncertainty that central banks around the world have conducted their policies, often struggling to anticipate the consequences of sudden changes in the global economic order. It is in this environment that Global Finance carried out its 31st annual rating of central bankers, covering 105 countries.
METHODOLOGY Global Finance The editors, with input from financial industry sources, grade the world’s leading central bankers from A to F, with A+ being the highest rating and F the lowest, based on objective and subjective measures. These judgments are based on performance from July 1, 2024 to June 30, 2025. A governor must have served in office for at least one year to receive a letter grade. Central bankers from countries experiencing deep conflict are not included due to incomplete information. An algorithm supports consistency of scoring across geographies. The proprietary formula takes into account monetary policy, financial system supervision, asset purchase and bond sale programs, forecasts and guidance, transparency, political independence and success in fulfilling the national mandate (which differs from country to country).
Much of the turmoil dates back to January, when Donald Trump was sworn in as president of the United States. His campaign rhetoric quickly gave way to executive actions and the massive introduction of tariffs, abrupt reversals, and constant stop-and-go policy decisions that have dominated international economic discussions. Even if countries with little exposure to trade with the United States feel fewer immediate shocks, they are all affected by the ripple effects. Global supply chains, commodity markets and cross-border investment flows remain unstable, complicating the work of central banks everywhere.
Monetary policy of course depends on a reasonably clear outlook for growth and prices. However, tariffs inject volatility on both fronts: they can weaken trade and investment, undermine business confidence and simultaneously fuel inflationary pressures by raising the costs of imports. This dual risk – slowing activity combined with rising prices – leaves central banks in a precarious position, unsure whether to tighten policy to defend price stability or ease it to support growth. So even countries furthest from the direct line of tariff fire are feeling the consequences, as developments in the world’s two largest economies – the United States and China – ripple through the global system and challenge the traditional levers of monetary policy.
This discrepancy has already become evident. In September, the US Federal Reserve resumed its easing cycle with its first rate cut since December 2024, distinguishing itself from most other major central banks which are maintaining the status quo. The Fed announced further cuts in October and December, citing a weakening labor market as the main factor in the reduction. Markets are now pricing in an additional easing of 50 basis points by the end of the year. The Bank of Canada followed with a cut to 2.5%, its lowest level in three years, also reflecting weakness in the labor market. Markets are pricing in a 40% chance of a further decline next month.
In contrast, the Bank of England and the Bank of Japan left their rates unchanged, while the European Central Bank also remained stable and indicated that its rate cut cycle may be coming to an end. The risk, however, is that central bankers will face new inflationary pressures in 2026.
“It’s takeoff, and the [US Federal Reserve] is now going all out to support the labor market, which heralds a decidedly aggressive cycle of budget cuts in 2025. The message is clear: growth and jobs are the priority, even if that means tolerating higher inflation in the short term.” Olu Sonola, head of US economic research at Fitch Ratings, said. “For now, the Fed is effectively communicating that it will cross the bridge to higher inflation if it manifests in 2026. What is striking is the lack of consensus around 2026. The lack of a unified view on policy suggests that the Fed may find itself once again in wait-and-see mode early next year, navigating inflation risks as they emerge rather than anticipating them.”
Central bankers’ bulletins 2025: by region
