By Laurenz Van de Sande | Europe | November 24, 2025| 17:56 CET

Frankfurt — Deutsche Bank anticipates that the US Federal Reserve will implement three interest rate cuts in 2026, as easing inflation and stabilising global trade conditions create room for monetary policy support, according to Deepak Puri, Chief Investment Officer for the Americas at Deutsche Bank Private Bank.

Speaking on Monday, Puri outlined a diverging outlook for major central banks, predicting no rate cuts from the European Central Bank (ECB) and two rate hikes by the Bank of Japan (BoJ), reflecting different inflation dynamics and economic recovery paths across regions.

Fed Seen Shifting Toward Easing Cycle

According to Deutsche Bank’s projections, the Federal Reserve is likely to pivot toward a more accommodative stance as inflation moderates and economic pressures related to recent trade tensions begin to fade. Puri noted that “the worst of the trade war is behind us,” suggesting that reduced geopolitical friction will help stabilise supply chains and support global commerce.

This expected monetary easing comes as Deutsche Bank forecasts improving growth prospects for key economies. The US, in particular, is projected to expand by 2.4% in 2026, supported by resilient consumer demand, stabilising interest costs, and gradual cooling in price pressures.

Diverging Central Bank Strategies

While the Federal Reserve is expected to cut rates, the ECB is forecast to maintain its current policy stance, with Deutsche Bank seeing no reductions in 2026. This reflects ongoing concerns over inflation persistence within the eurozone, where wage pressures and energy costs continue to pose risks to price stability.

In contrast, Japan’s central bank is expected to continue normalising monetary policy. Deutsche Bank projects two rate increases from the Bank of Japan as it moves further away from its historically ultra-loose policy framework, driven by improving wage growth and domestic demand.

Global Growth Outlook Brightens

Deutsche Bank now expects global economic growth to reach 3.1% in 2026, signalling cautious optimism after years marked by high inflation, pandemic recovery strains, and trade friction. Growth is anticipated to be led by the United States and China, with both economies benefiting from stabilising inflation trends and renewed investment momentum.

Puri also highlighted that inflation is expected to “somewhat ease” next year, a development that could provide central banks with greater flexibility to fine-tune monetary policy without risking overheating.

Market Implications

For investors, this outlook suggests a shifting global landscape where US assets could benefit from lower borrowing costs, while European markets may remain under tighter financial conditions. Meanwhile, Japan’s tightening policy stance may reshape capital flows and currency dynamics in the Asia-Pacific region.

Bottom Line

Deutsche Bank’s forecast points to a turning point in global monetary policy, with the Federal Reserve expected to lead a new easing cycle in 2026. As inflation pressures subside and trade tensions cool, the outlook signals a gradual return to more stable and growth-friendly economic conditions — though regional policy divergence remains a defining feature of the global financial environment.

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