Archive

December 19, 2025
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Mexico: Closing the Easing Door

  • Banxico cut by 25bp to 7%, broadly in line with expectations, but signalled a de facto pause with a more data‑dependent approach to future easing.
  • Sticky core inflation and upward‑revised forecasts for early 2026 mean additional cuts are unlikely before mid‑2026, keeping real rates above neutral for now.
  • A 4–1 split vote and fiscal/trade‑related upside risks to inflation argue for a prolonged hold in Q1 2026, limiting the scope and speed of the remaining easing cycle.
December 19, 2025
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BOJ: Measured Steps Toward Normalisation

  • A hike to 0.75% was delivered as expected, reflecting confidence in wage-led inflation momentum, though real rates remain deeply negative and uncertainty around trade policy and wage sustainability persists.
  • Future tightening hinges critically on 2026 spring wage negotiations reaching 5%+ and underlying inflation remaining firm as food-price effects wane. Some dissenting board members questioned inflation's near-term durability.
  • Real interest rates at significantly negative levels permit gradual tightening toward the estimated 1-2.5% neutral range, with markets pricing 1.0% by mid-2026. Limited runway and external risks may constrain the pace of normalisation.
December 18, 2025
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Norges Hold at 4%: Steady Course

  • The Norges Bank held rates steady at 4% as expected, signalling no urgency for cuts despite modest economic slack, as persistent underlying inflation near 3% and krone depreciation constraints remain material risks.
  • The forward rate path of 1–2 cuts in 2026 and a gradual decline to ~3% by 2028 reflects cautious normalisation rather than large-scale easing, with wage growth and exchange rate dynamics conditioning policy sequencing.
  • International trade uncertainty and the trajectory of global tariffs present asymmetric risks that justify patience. Future cuts depend critically on evidence of genuine disinflation and moderation in cost growth ahead.
December 18, 2025
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Riksbank Holds at 1.75%: Steady Path Ahead

  • Riksbank holds rate at 1.75% as expected (no surprise); expects stability through 2026 before gradual hikes to 2.1% by 2028 as recovery strengthens.
  • GDP growth up to 2.9% (2026 vs 2.7% prior); inflation stable near 2% CPIF supports extended accommodation without cuts.
  • Labour market improving amid risks (geopolitics, fiscal expansion); flexible to adjust if outlook shifts from baseline path.

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