(Bloomberg) — Central banks on four continents will make a final round of changes to borrowing costs in the coming week before Donald Trump’s return to the White House raises the prospect of turmoil in global trade.
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By the time policymakers from Australia, Canada, Brazil and the eurozone gather for their first scheduled meetings of 2025, the newly elected US president will have taken office and a potential wave of tariffs could move closer to reality.
The impending change in America will help reinforce a particularly unsynchronized phase in monetary policy, as different economies face different inflation risks.
Australian policymakers are likely to leave rates unchanged on Tuesday, while their Canadian counterparts, wary of the trade disruption that could quickly emerge from across the border, could make another cut of as much as half a percentage point the next day .
In Brazil, where the currency was hit last week by Trump’s threat to impose tariffs on the BRICS bloc, officials are poised to raise borrowing costs to quell rising inflationary pressures.
And for euro zone officials setting interest rates on Thursday, the focus is quickly shifting from monitoring ongoing risks to consumer prices to worrying about the impact of the potential hit to global trade. ECB President Christine Lagarde and her colleagues will cut interest rates by a quarter of a percentage point, just like the Swiss, whose currency attracts speculators in times of geopolitical tension.
These decisions are among the highlights in a period of concentrated monetary policy action that led to the Federal Reserve’s decision on December 18, which economists believe could lead to another quarter-point interest rate cut in the US.
What Bloomberg Economics says:
“It is highly likely that the ECB will cut rates by 25 basis points at its next meeting on December 12 and Governing Council members are drawing battle lines for what will follow in 2025.”
– David Powell, senior economist.
Elsewhere, US inflation and UK growth figures will be among the highlights. Click here for what happened last week, and below is our summary of what’s going to happen in the global economy.
USA and Canada
Several inflation reports, including Wednesday’s Consumer Price Index data, will give Fed policymakers a final look at the price environment ahead of their meeting the following week. Any indication that progress on inflation has stalled could undermine the chances of a third straight rate cut.
Friday’s closely watched jobs report showed the opposite, with traders increasingly betting that Fed officials will cut rates another 25 basis points after an unexpected rise in U.S. unemployment.
However, the average projection in a Bloomberg survey of economists calls for a fourth consecutive 0.3% monthly increase in November’s core CPI, which excludes food and energy for a better snapshot of the underlying inflation. On an annual basis, the core measure probably rose by 3.3% for a third month.
Meanwhile, the price paid to producers minus food and fuel likely rose 3.2% in November from a year earlier, the biggest annual increase since June, pointing to a gradual rise in wholesale inflation.
Further north, markets and economists are leaning toward a second straight 50 basis point cut by the Bank of Canada after the unemployment rate rose to a three-year high.
The central bank’s series of cuts since June appear to have revived the housing market and consumer spending — and Prime Minister Justin Trudeau’s plan to temporarily waive sales taxes on a variety of items has the potential to slow down shopping during the to give a boost to the holidays.
But Trump’s threat of 25% tariffs is casting a shadow over the Canadian economy, and Governor Tiff Macklem will likely face a barrage of questions about how the uncertainty will affect the central bank’s forecasts for the coming year .
Data on Monday could show that Chinese price developments improved by the narrowest of margins in November, with consumer inflation rising slightly to 0.5% and the decline in factory prices moderating somewhat. Data is expected to confirm that the impact of the stimulus measures is not yet seeping broadly into the economy.
The next day, China receives trade data that is expected to show that export growth has slowed over the past month. The Central Economic Work Conference, a meeting to determine the policy path for the country, would take place on Wednesday and Thursday.
Japan releases revised third-quarter gross domestic product data, which may see a small increase due to the inclusion of capital expenditure figures, and the Bank of Japan’s Tankan survey on Friday will show whether companies remain optimistic, even after the strongest quarterly decline in recent years. profit in more than two years.
Australia will release the NAB Business Confidence meter on Tuesday and labor statistics two days later.
India will announce consumer inflation on Thursday and trade figures from China, India, Taiwan and the Philippines will be released during the week.
Among central banks, the Reserve Bank of Australia is expected to hold rates steady on Tuesday as banks including ANZ move up their expected timelines for a shift to easing. RBA vice-chairman Andrew Hauser gives a speech the next day.
Uzbekistan’s central bank will decide on Thursday whether to keep its benchmark at 13.50% for the fourth time in a row.
Several monetary policy decisions are scheduled for Thursday:
The European Central Bank is likely to cut financing costs by a quarter of a percentage point and is also publishing new economic forecasts. Investors will focus on any comments from Lagarde on what might happen next, with markets betting on successive quarter-point cuts until the deposit rate – currently at 3.25% – reaches 2%.
The Swiss National Bank’s interest rate decision will almost certainly result in a quarter-point cut in what will be Martin Schlegel’s first policy meeting as president.
Serbian officials are meeting in Belgrade to decide whether to keep interest rates stable or possibly follow in the ECB’s footsteps.
Ukraine’s central bank will decide on borrowing costs, although no more cuts are expected this year.
One of the highlights of the Euroregion figures is industrial production, which will be published on Friday.
Outside the currency zone, Norway and Denmark will publish inflation data on Tuesday, and Sweden will publish monthly GDP figures the same day.
Growth figures are due in Britain on Friday, potentially signaling a return to modest expansion at the start of the latest quarter. The Bank of England’s inflation expectations are also on the calendar.
Heading south, South Africa will host its first meetings from Monday to Thursday as the turning head of the G-20 – which takes over from Brazil – amid a deeply polarized world and a Trump presidency that is expected to derail global trade will shake. Sherpas, deputy finance ministers and deputy central bank governors will meet to lay the groundwork for the governors’ meeting in November next year.
In Egypt, data on Tuesday is likely to show that inflation has slowed slightly from an annual rate of 26.5% in October. Most analysts doubt that interest rates will slow so quickly that the central bank can begin a cycle of rate cuts until around March.
On Wednesday, inflation in South Africa is expected to rise for the first time in nine months, from 2.8% in October to 3.1% in November, due to a weaker rand and rising petrol prices.
In Russia, monetary policymakers will look for further signs of slowing inflation in November data after it eased to 8.5% the month before. That’s as pressure mounts on the central bank to raise policy rates again this month in a continued bid to push price growth to its 4% target next year.
In Brazil, rising consumer prices and above-target tariffs should weigh on GDP reports and retail sales.
At the same time, inflation is likely to have moved further above the 4.5% top end of the target range over the past month, and the central bank is likely to end 2024 with a rate hike of at least 75 basis points.
Central bank expectations surveys are available from Brazil, Colombia and Chile, with the latter providing market information from both analysts and traders.
In Mexico, October’s industrial production and November’s consumer price report should provide new evidence that Latin America’s second-largest economy is cooling.
Analysts expect inflation and fundamentals to both fall, likely giving Banxico the green light for a fourth straight rate cut at its December meeting.
Peru’s central bank is likely to hold firm and maintain its key interest rate at 5% after the recovery in consumer prices in November.
Argentina’s economy has likely pulled out of recession and the end of capital controls in 2025 seems a given.
But monthly disinflation may have bottomed out in the near term at October’s 2.7%, even as November’s rate falls for the seventh month in a row on an annual basis.
—With help from Patrick Donahue, Brian Fowler, Vince Golle, Tony Halpin, Robert Jameson, Laura Dhillon Kane, Monique Vanek and Paul Wallace.
