New Delhi [India], January 5 : Global monetary policy is expected to remain largely accommodative in 2026, even though most of the easing in the current cycle has already taken place during 2024 and 2025, according to a report by MUFG Bank (Mitsubishi UFJ Financial Group).
The report said that major central banks across the world are likely to continue supporting growth through either further easing or by keeping interest rates on hold in 2026.
Central banks such as the US Federal Reserve, the Bank of England, Norges Bank and the People's Bank of China are expected to ease policy further. Meanwhile, institutions like the European Central Bank, Bank of Canada, Swiss National Bank and Sweden's Riksbank are likely to maintain current interest rates.
It stated "While the bulk of monetary easing in the current cycle occurred in 2024-2025, global monetary policy should nonetheless be fairly accommodative in 2026".
The report also mentioned that only a small group of central banks are expected to move in the opposite direction. The Bank of Japan and the Reserve Bank of Australia are among the few that may tighten monetary policy in the year ahead, the report noted.
Alongside monetary policy trends, the report highlighted a sharp rise in corporate spread dispersion during 2025. Even as US dollar corporate bond spreads at the index level tightened to multi-decade lows, differences in spreads across industries increased significantly.
According to the report, rising global policy confrontation became a key driver of market behaviour in 2025. This led to higher volatility and wider dispersion across industries, capital structures and regions. A much larger share of bonds traded far away from index averages in 2025 compared to 2021.
The report also pointed out that dispersion within sectors increased, driven by varying exposure to trade wars and tariff-related policies, adding to uneven market performance across industries.
The report outlined by stating that "As global policy confrontation became a primary catalyst for markets, increased volatility and spread dispersion took hold across industries, capital structures and regions".
The Reserve Bank of India in December announced a 25 basis points reduction in the policy repo rate, bringing it down to 5.25 per cent. In the entire year 2025, the RBI announced a reduction of 125 bps.
The RBI governor in the December policy stated that the MPC undertook a detailed assessment of evolving macroeconomic conditions and future outlook before arriving at the unanimous decision to implement the rate cut with immediate effect.