With this latest rate cut Wednesday, we’re starting to see the Federal Reserve’s policy diverge from other central banks around the world.

Over the last few days there’s been suggestions from the central banks of Canada, Australia, and the Eurozone that they might be done cutting rates for now. And some might even end up raising rates in the near future.

It’s a little unusual when central banks move in opposite directions.

“Because normally, the business cycle in different regions moves together, and everybody’s doing the same thing at the same time,” said Ken Rogoff, a Harvard economics professor.

He said the moment we’re in right now is really no different. Central banks around the world are feeling pressure to either hold rates steady or even raise them. And not just because of persistent inflation. 

“The fracturing of the global trading system puts upward pressure on interest rates,” Rogoff said. “Weak immigration puts pressure on interest rates. Spending on the military puts pressure on interest rates.”

And if the Fed keeps cutting rates while other central banks don’t? Rogoff said investment will flow to the highest bidder.

“Capital markets are global. So, the money’s going to move to where the rate of return looks good,” he said.

The European Central Bank is likely to hold rates steady going forward.

“They’ve done a fairly good job bringing inflation back down to their target levels. And they’ve also just recently upgraded their forecast for GDP growth,” said Ben Shoesmith, senior economist at KPMG.

He said the Bank of Canada is likely to hold off on rate cuts too, also thanks to better-than-expected growth. Meanwhile Australia’s central bank has been concerned about inflation.

“For the time being, as they expect there to be this short bump-up of inflation early in 2026, they’re likely to sit on it for a bit,” Shoesmith said.

But while this divergence between the Fed and other central banks could cause capital to flow out of the U.S., that situation probably won’t last very long said George Pearkes, macro strategist with Bespoke Investment Group.

“If we do see the ECB for instance, start to hike, or the Bank of Canada, or the Reserve Bank of Australia start to hike, they may do that for a period, but we would expect the U.S. to not be able to cut too much before moving into a similar spot,” Pearkes said.

He said that’s because global economies are just too interlinked.

“It’s hard for those elastic bands that tie economies together to stretch too far apart,” Pearkes said.

Which means the Fed’s rate cutting cycle could soon be coming to an end.