The Global Easing Cycle is Fracturing—And That's the Real Story

The grand synchronization of central bank cuts that defined 2024 and early 2025 is coming to an end. Not with fanfare or crisis, but with something far more unsettling: divergence.

Over the past seventy-two hours, we've watched the edifice of coordinated monetary easing begin to split along fault lines that have been widening for months. The Federal Reserve cut rates on October 29 but immediately signaled the cuts are over. The Bank of England holds on November 6, maintaining rates at 4.0% despite a weakening labor market. The consensus builder—the synchronized world of "all central banks move together"—is dead.

This matters more than any single data point because it reveals something structural about where we actually are in this cycle.

The Inflation Anchor That Won't Let Go

For the past eighteen months, central banks operated on a shared assumption: inflation would compress toward target if they simply cut rates. The Fed got there first, followed by the ECB, the Bank of England, and others in a cascade of easing that soothed markets and provided ballast to slowing growth.

But here's what actually happened. Core inflation in the US remains sticky at 3.3%. In the UK, it's 3.8%—nearly double the Bank's 2% target—and hasn't budged in three consecutive months. Even the eurozone, which led the way in disinflation, remains above 2%. Services inflation, the hardest form to compress, continues to resist rate cuts. Wage growth hasn't rolled over the way the models predicted it would.

The central banks got the direction right. They just miscalculated the speed.

So now we have a situation where the Fed, staring at sticky inflation and uneven growth, decides to pause. The Bank of England, facing exactly the same trade-off (persistent inflation versus deteriorating employment), also decides to pause. Both are waiting for data that simply refuses to cooperate. Both are essentially admitting that monetary policy alone can't solve this puzzle.

This is what intellectual honesty looks like in real time—and the market doesn't know what to do with it.

The Government Shutdown as Metaphor

The US government shutdown has now eaten nearly a full percentage point off Q4 GDP growth, with projections climbing toward a $40 billion hit if it persists through November. The Congressional Budget Office measures this with precision, but the real damage isn't quantifiable. It's the fact that a functioning central bank can't properly assess the labor market because the jobs report is missing. The Fed makes its decisions blind.

Meanwhile, in London, the Bank of England faces a different kind of uncertainty: the "wildcard" of Rachel Reeves' Autumn Budget on November 26. The Chancellor is expected to announce significant tax rises aimed at covering fiscal shortfalls. A contractionary fiscal policy arriving just as the central bank is trying to determine its easing path creates a kind of policy collision—and the Bank is explicitly waiting to see how the collision plays out before committing to further cuts.

In both cases, what we're witnessing is central banks stepping back from the assumption that they're the only force that matters. They're deferring to political actors. They're acknowledging that monetary policy operates inside a larger ecosystem that's currently malfunctioning.

The 1970s had stagflation. The 2020s may have something worse: incomplete policy.

Where the Divergence Actually Matters

The Bank of England's decision to hold on November 6 is a milestone, even if it looks like a non-event. For the first time since the easing cycle began, a major central bank is explicitly choosing not to cut rates despite clear evidence that growth is slowing and labor conditions are weakening. The 7-2 vote in September showed an MPC split on whether to cut—and that division is widening. The November decision will be crucial.

If the Bank holds again—which most analysts expect—the UK enters a different monetary regime than the US. Higher relative yields in sterling, combined with the risk of contractionary fiscal policy, could weaken growth further and create a policy trap: inflation too high to cut rates, growth too weak to justify holding them.

This asymmetry between the Fed and the BoE, in turn, affects capital flows, currency markets, and asset allocation decisions globally. When central banks stop moving in unison, volatility explodes.

The eurozone remains somewhere in the middle, with the ECB likely to cut again before year-end but facing the same fundamental problem: inflation that won't compress fast enough to justify aggressive easing. The euro sits in a kind of purgatory—not weak enough to spur exports, not strong enough to reassure savers.

The Structural Question

Here's what the past three days have actually clarified: central banks have bumped up against the limits of what rate cuts alone can accomplish. They can smooth downturns, provide liquidity, buy time for other actors. But they can't fix wage growth that's structurally elevated. They can't engineer a labor market rebalancing that fiscal policy has failed to address. They can't override the fact that energy prices, food prices, and service inflation are partly driven by supply-side constraints rather than demand.

Powell's comment that a December cut is "not a foregone conclusion"—that almost casual dismissal of what markets had priced in—is him saying quietly that the Fed has done what it can. The rest is up to the economy, fiscal policy, and supply chains.

The Bank of England's hold, by contrast, looks like a central bank still waiting for more information—not from markets or inflation data, but from the government itself. What will the Budget say? What will fiscal policy actually do?

Both are forms of central bank abdication, really. Not failure—abdication. A recognition that they've pushed monetary accommodation as far as it can go, and now they're watching to see whether the rest of the economy will cooperate.

What This Means for November

Expect the November 6 Bank of England decision to be a catalyst for increased volatility. If they hold (expected), sterling weakens further, gilt yields compress, and capital flows recalibrate. The decision won't be dramatic—7-2 or 6-3 to hold—but the tone will matter. Any hint that a cut could come in December changes the entire equation.

Markets are pricing in approximately 86 basis points of cumulative BoE cuts by the end of 2026, suggesting traders believe the Bank will eventually move, just slowly. If the November minutes suggest more aggressive future cuts, you'll see rotation out of dollar assets. If they suggest patience, the dollar strengthens and gilt spreads widen.

The real risk is that central banks have collectively created an expectation of perpetual easing that the economic data no longer supports. They cut rates, but inflation doesn't fall fast enough to justify cuts. They pause, but growth doesn't accelerate fast enough to justify holds. They're stuck in a recursive loop where the next decision is always dependent on data that's always six weeks away.

In financial markets, this is called "optionality." In human terms, it's called uncertainty.

The synchronized easing cycle made sense when inflation was clearly falling and growth was clearly slowing. But we're not in that world anymore. We're in a world where inflation is sticky, growth is uneven, fiscal policy is in chaos, and central banks are deliberately moving at different speeds.

This asymmetry—this fracturing of the global consensus—is the real story of November. Not whether Powell cuts or Bailey holds. Whether central banks will actually admit that monetary policy can't carry the entire load anymore.

The odds aren't good that they do.