One cuts, one holds, one turns hawkish: central banks split in the same week

Three directions at once

There is no single direction in monetary policy this week. Banco de México cut its policy rate by 25 basis points to 6.25%, effective November 6. Norges Bank kept its policy rate unchanged at 4.5%. Poland's Monetary Policy Council has shifted to a clearly hawkish bias, according to Erste Bank research. And Ukraine's central bank had already moved the other way, raising its key policy rate from 15% to 16.5% between July and October 2026. Four banks looked at a similar world and gave four different answers. m:…3872 m:…6532 m:…4038 m:…4823 m:…1710

The backdrop they share is not a calm one. Banco de México's own statement notes that world economic activity growth in the third quarter is expected to be slightly lower than the previous quarter, and that headline inflation in several major advanced economies increased due to rising energy prices. It also notes that the Federal Reserve left its target range for the federal funds rate unchanged in its October meeting. The same energy-driven inflation pressure that one bank is cutting through is the pressure another bank is holding rates against. m:…1710

Why Mexico cut

Mexico's cut was not a consensus decision. The governing board voted 3-2 to lower the target, with Victoria Rodríguez, Gabriel Cuadra and Omar Mejía voting in favor and Galia Borja and Jonathan Heath voting to hold at 6.50%. The board expects to hold the new 6.25% rate unchanged for an extended period, and BBVA Research describes the move as a one-off adjustment meant to support inflation convergence and address external macroeconomic challenges. m:…1710 m:…3872

The inflation numbers behind the decision are mixed, which is presumably why the vote split. Headline inflation rose from 3.42% to 3.62% between the first fortnight of September and the first fortnight of October 2026, while core inflation edged down from 3.79% to 3.78%. The bank expects headline inflation to converge to target in the fourth quarter of 2027, but says the balance of risks for inflation remains biased to the upside. BBVA's reading is that the board's confidence in the disinflation process is stronger than recent inflation data suggests, and stronger than its own updated forecasts suggest. There is considerable uncertainty surrounding the neutral real interest rate, BBVA adds, and risks for the peso are tilted toward further weakness, though the current exchange rate level is close to fair value estimates. m:…1710 m:…3872

The ones who waited, and the one who already moved

Norway's hold comes with a warning attached. Governor Ida Wolden Bache stated that inflation is too high, and the committee says it is prepared to raise the policy rate if needed to bring inflation down to target. Twelve-month CPI inflation was 3.4% in September, and CPI inflation adjusted for tax changes and excluding energy products was 3.0%. Capacity utilisation has declined and appears slightly below a normal level, registered unemployment has been a bit lower than projected, and employment has increased a little more than expected. Conflicts in the Middle East are creating substantial uncertainty about the inflation outlook, the bank says, with oil spot prices fallen but futures prices up somewhat, and spot and futures prices for gas and electricity moved up. The krone has appreciated and is stronger than assumed. The committee says it has not received information indicating the outlook has changed materially since its September meeting, and its next monetary policy report will be published on December 17, 2026. m:…6532

Poland's hawkish turn sits next to a fiscal picture that complicates it. The 2026 budget deficit is expected to be about 6.7% of GDP, against 7.1% assumed in the 2027 draft budget, and market-implied expectations for Polish rate hikes have fallen to three hikes over the next 12 months, according to Erste. S&P is expected to revise the outlook on Poland's rating to negative while keeping the rating at A-. A Sejm vote on a motion to bring National Bank of Poland governor Adam Glapiński before the State Tribunal is expected to be postponed to January. m:…4038

Ukraine is the sharpest contrast of all, because its central bank has already done the tightening others are debating. It raised its key policy rate from 15% to 16.5% between July and October 2026, and forecasts inflation will accelerate to 12.5% in 2026 before declining to 7.3% in 2027 and reaching the 5% target in 2028. Real GDP is expected to contract by 0.4% in 2026, then grow 0.4% in 2027 and 2.2% in 2028. The budget deficit is projected at 35% of GDP in 2026 and 37% in 2027, with $50 billion in direct budget financing expected in 2026 and more than $52 billion in 2027. Russian attacks in the third and fourth quarters of 2026 will leave real GDP 1.9 percentage points lower in 2026, annual inflation 0.7 points higher, and trade balance losses of $6.6 billion, the bank estimates. The lesson for anyone watching rates globally is that there is no global rate cycle right now — there are local cycles, and they are pointing in different directions. m:…4823