Money market and liquidity

Global liquidity snapshot

January 1, 2026

Invesco Global Liquidity

Key takeaways

The Fed cut rates to 3.50%–3.75% as inflation stayed elevated and labor softened. The BOE cut 25 bps, while the ECB held rates at 2%.

US inflation and slower hiring may pause Fed cuts. BOE policy should ease gradually in 2026. The ECB remains cautious but constructive.

Short-end yields and T‑bills remain attractive in the US. In the UK, we’re comfortable extending maturities. In Europe, we prefer liquid, high‑quality holdings.

US

The Federal Reserve (Fed) continued its easing cycle in Q4 2025, delivering two additional 25 basis point rate cuts, bringing the federal funds target range to 3.50%–3.75%. The Federal Open Market Committee’s (FOMC) December meeting confirmed a cautious approach, with policymakers emphasizing risk management amid persistent inflation and a slowing labor market. Governor Miran remained the consistent dissenter, advocating for more aggressive cuts, but the committee maintained a gradual stance. The October government shutdown lasted for 43 days, delaying key economic data releases. While the short-term impact was limited, concerns linger about potential permanent government job cuts and broader economic uncertainty.¹