Archive

HEW: Hawkishly Easing Into Holidays

• There was a remarkable lack of surprise over the past week, with several central bank decisions and top-tier data releases matching forecasts. Hawkish cuts, primarily from the Fed, dominated the relatively dovish holds from the BoE, BOJ and Norges bank.
• Releases dry up like market liquidity for Christmas next week. This publication series will return on 10 January, although clients will get a few other pieces in between.
• Note: Smartkarma becomes our research portal in January, so set your passwords ready. Should there be any queries, please direct them to transition@smartkarma.com.

By Philip Rush

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.

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.

Sweden: 25bp Rate Cut to 2.5% (Consensus 2.5%) in Dec-24

• The Riksbank cut its policy rate by 25bp to 2.5%, meeting consensus expectations and reflecting a total reduction of 1.5 percentage points since May 2024 to support weak economic activity and stabilise inflation near the target.
• Forward guidance indicates the potential for another rate cut in H1 2025, contingent on stable inflation and growth projections, emphasising evaluating the lagged effects of earlier policy adjustments.
• External uncertainties, including geopolitical tensions and trade policy ambiguities, alongside domestic risks, such as the krona's exchange rate and fragile recovery momentum, will influence future monetary policy decisions.