Europe's "Super Central Bank Day" is coming! Four major central banks will take the stage, but will only one cut interest rates?
2025-12-18 14:59:53
Markets are bracing for the final interest rate decision of 2025, with all four European central banks set to release their monetary policies and macroeconomic outlooks on Thursday evening (December 18).
The European Central Bank, the Bank of England, the Swedish central bank, and the Norwegian central bank will all hold meetings, but only one of them is expected to adjust interest rates.
The European Central Bank is expected to keep interest rates unchanged, as recent economic data does not indicate a need for adjustment.
However, investors are more concerned about the growing divisions within the Governing Council – some members, including Isabel Schnabel, have publicly supported the market's expectation that the next interest rate adjustment will be a rate hike, while other members believe there is still room for rate cuts.
Christian Kopf, head of bond portfolio management at German investment firm Allied Investments, said: "I do not expect the Eurozone to adjust interest rates in the short term . If there is any change in 2026, the most likely scenario is a rate hike at the end of 2026 or the beginning of 2027."
When the European Central Bank releases its latest internal economic forecasts, it is expected to raise its growth expectations for the eurozone.
The Norwegian central bank is expected to keep its benchmark interest rate unchanged at 4% on Thursday, with economists predicting the next rate cut may not come until the summer of 2026. The Norwegian central bank will announce its monetary policy decision at 10:00 AM local time (5:00 PM Beijing time).
Morten Lund, chief economist for Scandinavia at JPMorgan Chase, said that the Norwegian central bank's policy guidance on Thursday "should dampen market expectations of a rate cut in March next year." He believes that current market expectations for a rate cut in March next year are "fiscal-neutral" (meaning there is a 50/50 chance).
However, JPMorgan Chase expects the next rate cut to take place in June next year, although the Norwegian central bank is unlikely to specify the timing of the rate cut.
Lund added, "The forward guidance will remain vague, only indicating that if economic developments are broadly in line with current forecasts, policy rates will be gradually lowered over the next year. We also expect the governor to emphasize that inflation remains too high and reiterate that we are in no hurry to lower policy rates ."
The Swedish central bank is expected to announce at 9:30 a.m. Central European Time (4:30 p.m. Beijing Time) that it will maintain its key policy rate at 1.75%.
UBS Investment Bank's Fischer said that interest rates are unlikely to change in the coming quarters, and she believes that the Swedish central bank's easing cycle has ended.
Fischer said: "The Swedish central bank cut its policy rate by 25 basis points in September, but held it steady in November, while indicating that the policy rate is likely to remain unchanged for some time to come ."
She added that UBS believes that developments since November have not been enough to change the interest rate outlook.
The Bank of England is the only central bank likely to announce an interest rate cut this Thursday , with a slim majority of its nine-member Monetary Policy Committee expected to support a 25 basis point cut, bringing the benchmark rate down to 3.75%.
The latest inflation data shows a significant drop in price increases, with the inflation rate plummeting to 3.2% in November, coupled with recent gloomy economic growth data and rising unemployment in the UK.
Although the inflation rate remains above the central bank's 2% target, the downward trend provides the central bank with room to maneuver in stimulating the economy, consumption, and lending through interest rate cuts.
The British government announced its autumn budget last month, which is seen as having deflationary effects because it includes measures to reduce energy costs, freeze fuel taxes and train fares.
Of these four central banks, only the Bank of England is likely to cut interest rates. This difference in monetary policy cycles (the Eurozone holding rates steady vs. the UK initiating rate cuts) will be relatively favorable for EUR/GBP from an interest rate differential perspective. This difference in market expectations also supported EUR/GBP during Thursday's Asian and European sessions, with a gain of approximately 0.13%.
(EUR/GBP daily chart, source: FX678)
At 14:59 Beijing time, the euro was trading at 0.8784/85 against the pound.
The European Central Bank, the Bank of England, the Swedish central bank, and the Norwegian central bank will all hold meetings, but only one of them is expected to adjust interest rates.
European Central Bank
The European Central Bank is expected to keep interest rates unchanged, as recent economic data does not indicate a need for adjustment.
However, investors are more concerned about the growing divisions within the Governing Council – some members, including Isabel Schnabel, have publicly supported the market's expectation that the next interest rate adjustment will be a rate hike, while other members believe there is still room for rate cuts.
Christian Kopf, head of bond portfolio management at German investment firm Allied Investments, said: "I do not expect the Eurozone to adjust interest rates in the short term . If there is any change in 2026, the most likely scenario is a rate hike at the end of 2026 or the beginning of 2027."
When the European Central Bank releases its latest internal economic forecasts, it is expected to raise its growth expectations for the eurozone.
Central Bank of Norway
The Norwegian central bank is expected to keep its benchmark interest rate unchanged at 4% on Thursday, with economists predicting the next rate cut may not come until the summer of 2026. The Norwegian central bank will announce its monetary policy decision at 10:00 AM local time (5:00 PM Beijing time).
Morten Lund, chief economist for Scandinavia at JPMorgan Chase, said that the Norwegian central bank's policy guidance on Thursday "should dampen market expectations of a rate cut in March next year." He believes that current market expectations for a rate cut in March next year are "fiscal-neutral" (meaning there is a 50/50 chance).
However, JPMorgan Chase expects the next rate cut to take place in June next year, although the Norwegian central bank is unlikely to specify the timing of the rate cut.
Lund added, "The forward guidance will remain vague, only indicating that if economic developments are broadly in line with current forecasts, policy rates will be gradually lowered over the next year. We also expect the governor to emphasize that inflation remains too high and reiterate that we are in no hurry to lower policy rates ."
Swedish Central Bank
The Swedish central bank is expected to announce at 9:30 a.m. Central European Time (4:30 p.m. Beijing Time) that it will maintain its key policy rate at 1.75%.
UBS Investment Bank's Fischer said that interest rates are unlikely to change in the coming quarters, and she believes that the Swedish central bank's easing cycle has ended.
Fischer said: "The Swedish central bank cut its policy rate by 25 basis points in September, but held it steady in November, while indicating that the policy rate is likely to remain unchanged for some time to come ."
She added that UBS believes that developments since November have not been enough to change the interest rate outlook.
Bank of England
The Bank of England is the only central bank likely to announce an interest rate cut this Thursday , with a slim majority of its nine-member Monetary Policy Committee expected to support a 25 basis point cut, bringing the benchmark rate down to 3.75%.
The latest inflation data shows a significant drop in price increases, with the inflation rate plummeting to 3.2% in November, coupled with recent gloomy economic growth data and rising unemployment in the UK.
Although the inflation rate remains above the central bank's 2% target, the downward trend provides the central bank with room to maneuver in stimulating the economy, consumption, and lending through interest rate cuts.
The British government announced its autumn budget last month, which is seen as having deflationary effects because it includes measures to reduce energy costs, freeze fuel taxes and train fares.
Of these four central banks, only the Bank of England is likely to cut interest rates. This difference in monetary policy cycles (the Eurozone holding rates steady vs. the UK initiating rate cuts) will be relatively favorable for EUR/GBP from an interest rate differential perspective. This difference in market expectations also supported EUR/GBP during Thursday's Asian and European sessions, with a gain of approximately 0.13%.
(EUR/GBP daily chart, source: FX678)
At 14:59 Beijing time, the euro was trading at 0.8784/85 against the pound.
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