I was thinking about how things are shaping up in the global economy. It’s interesting to see that many major economies are starting to cut interest rates. This got me wondering—will this be a slow, controlled process, or will external shocks force rates to drop much faster than expected?
We’ve seen this before. Think back to the Great Recession in 2008 or the COVID-19 crisis. In both cases, central banks around the world slashed interest rates dramatically to support struggling economies. Could something similar happen again?
One major factor in this equation is tariffs—specifically, the trade policies being discussed in the U.S. If Trump implements aggressive tariffs, it could disrupt global trade. Higher tariffs often lead to slower economic growth, which in turn puts pressure on central banks to cut interest rates further.
Right now, rate cuts are happening gradually, but history tells us that financial markets don’t always move in a straight line. If economic shocks—whether from trade wars, geopolitical tensions, or unexpected downturns—hit hard, we might see rates dropping faster than anticipated.
So, are we heading for a soft landing with gradual rate cuts, or could we be looking at another scenario where rates plunge to near-zero levels? Only time will tell, but one thing is clear—economic policy decisions in the next year will have a huge impact on where we go from here.