Are Central Banks Winning the Fight Against Inflation?

After one of the fastest global inflation surges in decades, policymakers are finally seeing signs that their aggressive rate rises are working. Prices are cooling across major economies, but uncertainty remains over how long high interest rates will be needed to maintain stability.

In the United States, inflation has fallen from a peak of more than nine percent in June 2022 to about two point seven percent in September 2025, according to the U.S. Bureau of Labor Statistics. The Federal Reserve has kept its benchmark rate between five and five point two five percent, its highest level in over two decades. Federal Reserve Chair Jerome Powell recently said, “By returning to a focus on price stability and a two percent inflation target, this implies that all concerned should prepare for higher rates for longer.” His comments underline the Fed’s determination to bring inflation fully under control, even if that means slowing growth.

Europe’s picture is improving but remains fragile. Eurostat data show that inflation in the euro area stood at two percent in August 2025, holding steady in September and edging up slightly to two point one percent in October. Christine Lagarde, president of the European Central Bank, noted in her September policy statement, “Inflation is currently at around our two percent medium term target.” The ECB has kept its key deposit rate at four percent and is taking a cautious stance on rate cuts. Lagarde added that the bank “must not declare victory too soon” as wage pressures remain strong in several member states.

The United Kingdom’s progress is also notable. Inflation has dropped from over eleven percent in late 2022 to around three point two percent in the third quarter of 2025, according to the Office for National Statistics. Bank of England Governor Andrew Bailey stated in October, “We are encouraged by the progress we have made, but inflation is not yet defeated.” The central bank has maintained its base rate at five point two five percent, aiming to balance lower prices with continued economic stability.

Emerging markets entered this cycle earlier and are now leading on the way out. Brazil’s inflation stood near four point six percent in September 2025 after peaking above twelve percent in 2022. The Central Bank of Brazil has started to lower its benchmark Selic rate from thirteen point seven five percent last year to ten point five percent today. India’s inflation is also stable near five percent, supported by strong domestic demand and steady monetary policy from the Reserve Bank of India.

Globally, inflation has declined from above eight percent in 2022 to just under three and a half percent in 2025, according to the International Monetary Fund. Growth, however, is slowing. The IMF projects global GDP to expand by only three percent this year, compared with a historical average of about three point eight percent.

The challenge now is shifting from defeating inflation to sustaining recovery. If central banks cut rates too early, inflation could return. If they wait too long, borrowing costs may drag on growth. The next year will test their ability to strike the right balance.

As Jerome Powell put it, “Restoring price stability is essential to set the stage for sustainable growth.” Inflation may finally be under control, but the global economy’s next phase will reveal whether that stability can last