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Norway: Rates Held At 4.5% (Consensus 4.5%) in Dec-24

• The Norges Bank held the policy rate at 4.5%, aligning with the consensus, and signalled potential easing from March 2025, contingent on continued economic moderation.
• Inflation has slowed significantly but remains above target, constrained by high wage growth and business costs; domestic activity has exceeded expectations, while unemployment remains stable.
• The outlook is marked by uncertainty, with risks from global trade policy and domestic inflationary pressures influencing the trajectory of future rate adjustments.

Japan: Policy Rate Held At 0.25% (Consensus 0.25%) in Dec-24

• The BoJ kept its policy rate at 0.25%, aligning with consensus expectations. Domestic recovery and stabilising inflation reduced the need for immediate policy adjustments.
• It forecasts inflation to stabilise near the 2% target by fiscal 2025, supported by an improving output gap and rising medium-term inflation expectations, despite external risks and commodity price fluctuations.
• The BoJ’s review of its monetary policy emphasised flexibility in achieving sustainable inflation, with a continued focus on balancing growth-supportive measures against evolving domestic and global risks.

Mexico: 25bp Rate Cut To 10.0% (Consensus 10.0%) in Dec-24

• Banco de México reduced the overnight interbank rate by 25 basis points to 10.00%, continuing its cautious easing amid declining headline and core inflation trends. Global inflation persistence adds uncertainty.
• It expects inflation to reach the 3% target by Q3 2026, but risks remain skewed to the upside, driven by potential trade policy shifts, persistent services inflation, and geopolitical disruptions.
• Future rate decisions will balance the easing cycle with the need for a restrictive stance. They will rely on data to assess the fading of global shocks and domestic inflationary pressures.

UK Inflation Extends Broad Rebound

• UK inflation matched expectations by increasing to its highest headline pace since March, although this doubled the BoE’s forecast error to 0.2pp (0.1pp in services).
• Only one division contributed much less to the monthly impulse than last year, with the median rate remaining excessive at 3% amid broadly high unit labour cost rises.
• An early December index date will likely be used, weighing on airfares in the short term. Our forecast still gaps higher than others in 2025 despite the consensus rising.

By Philip Rush