ISTANBUL
Global central banks are entering the last month of the year with a busy schedule, while inflation concerns seem likely to regain strength, prompting banks to act with caution.
US inflation and employment risks continue to hinder the Federal Reserve’s decision for the coming period, while central banks around the world are on the lookout for the monetary policy decisions of the bank.
US tariffs fueled trade tensions and macroeconomic uncertainty in the global economy throughout the year — central banks are preparing to conclude this hectic year with declining tariff concerns and a focus on fighting inflation.
The Fed, the European Central Bank (ECB), the Bank of England (BoE), the Bank of Japan (BoJ), the Reserve Bank of Australia (RBA) and the Turkish Central Bank (TCMB) are expected to make monetary policy decisions in December.
Fed likely to cut rates in December
The Fed is likely to cut rates at its upcoming meeting following the longest government shutdown of 43 days, moderate inflation and cooling employment data.
The Fed’s likelihood of cutting rates by 25 basis points in December stands at 86%, according to money market estimates. Fed officials are torn between the two paths the bank should follow — some officials say the bank should remain cautious to avoid disrupting the fight against inflation, while some say conditions are just right for rate cuts.
The Fed cut its policy rate by 25 basis points to 3.75–4% in October, within estimates. This was the bank’s second rate cut of the year. Fed Chair Jerome Powell said after that month’s meeting that there was a strong divide between opinions within the committee and that further cuts are not for certain.
The Bank of Canada, which is also on the radar of investors, is also scheduled to announce its interest rate decision on the same day but ahead of the Fed.
All eyes turn to ECB, BoE rate cut prospects
The ECB is expected to leave its rates unchanged on Dec. 18, after the eurozone’s annual inflation, which came within estimates at 2.1% in October, pointed to a decline versus the previous data.
The region’s inflation is hovering close to the ECB’s medium-term target, while the bank is also deemed to be done with its easing cycle this year.
The ECB is highly likely not to cut rates at its next meeting, according to money market estimates. The bank had cut three key policy rates by 100 basis points this year before pausing in July.
Meanwhile, the BoE is expected to cut its base policy rate to 3.75% on Dec. 18.
The bank cut rates by 25 basis points in August, bringing its total reduction to 75 basis points. With this month’s cut, the total rate cut of the BoE is expected to reach 100 basis points for 2025.
BoJ’s course of action remains uncertain
The BoJ’s likelihood of raising its policy rate at its next meeting scheduled for Dec. 18-19 is on the rise in money market estimates with a 57% possibility, while its probability to maintain its rate is also on the table.
Japan’s central bank kept its policy rate unchanged at 0.5% in October. The decision was made by a vote of seven to two.
The BoJ announced later that it is not changing its inflation forecasts, projecting core inflation to be 2.7% in fiscal 2025 and 1.8% in fiscal 2026 while reiterating its commitment to continue raising borrowing costs if the economy develops in line with these estimates.
Japan’s annual core inflation rose to 3% in October, above the BoJ’s year-end estimates.
RBA’s interest rate expected to remain unchanged
Over in Oceania, the RBA is widely expected to maintain its policy rate unchanged.
The Australian bank also left its policy rate unchanged in November at 3.6%.
The RBA said in a statement that Australia’s inflation fell significantly since its peak in 2022, but a recent rise in inflation has come to the fore.
Domestic economic activity in Australia continued to recover, but the outlook remains uncertain.
All eyes turn to Turkish Central Bank
The TCMB will make its monetary policy decision on Dec. 11.
In October, the bank cut its policy rate by 100 basis points to 39.5%.
The bank’s board said it lowered the overnight lending rate from 43.5% to 42.5% and the overnight borrowing rate from 39% to 38%.
The bank said that recent data pointed to a disinflationary level in demand conditions, while disinflation slowed.
Analysts say domestic investors in Türkiye are on the lookout for signals the bank will provide in this month’s rate decision, while the November inflation data to be announced is under the radar of the economic community.
