Eurozone inflation approaching 2% may keep ECB rates constant in December
A euro-zone inflation reading that is expected to remain near 2 per cent should reassure officials that they can refrain from adjusting interest rates in December. According to the forecasts ahead of Tuesday’s release, consumer prices likely increased by 2.1 percent in November compared to the same month last year. The core measure, excluding volatile components like energy, is expected to hold steady at 2.4 percent. Such readings for the final inflation numbers before the European Central Bank’s Dec. 18 decision may strengthen the determination of policymakers to maintain current borrowing costs, enabling them to concentrate on crucial quarterly forecasts that include the first outlook extending to 2028. Officials currently find themselves in a state of indecision as conflicting signals from national reports show stronger-than-expected inflation in Germany and Spain, countered by weaker-than-anticipated figures for France and Italy. If there is any bias within the Governing Council, it may lean toward examining upward pressure on price growth, with Vice President Luis de Guindos and President Christine Lagarde expected to provide further insight this week.
The lack of clarity from the ECB is reflected in divergent opinions among economists. Bloomberg Economics predicts that inflation will decelerate in the coming months, strengthening the case for future rate cuts. Euro-area inflation will likely remain steady in November at just above the central bank’s 2 percent target before resuming a deceleration in December, which could intensify pressure on the ECB to ease policy despite current reluctance. BNP Paribas provides an alternative view, expecting stronger growth and inflation into 2026, strengthening the case for a prolonged rate hold and even suggesting the next move may be a hike. On Tuesday, the OECD is set to unveil new forecasts, while the US will release a consumer-price gauge. Policymakers in the UK will present their financial-stability assessment, and Brazil may be nearing the end of its longest growth streak in decades. Federal Reserve officials will receive an update on their preferred inflation measure ahead of their final meeting of the year.
On Friday, the Bureau of Economic Analysis will release its delayed September income and spending report, including the personal consumption expenditures price index and its core measure, expected to show a third straight 0.2 percent rise. That would keep year-over-year core inflation just below 3 percent, still above the Fed’s target. Discussions among officials will focus on the job market and the possibility of a third consecutive rate reduction on Dec. 9-10, with investors seeing a cut as more likely than not. Although the latest jobs report showed stronger payroll growth, gains were concentrated in few industries, while unemployment rose to a nearly four-year high amid ongoing layoff announcements. Additional data next week includes ADP private employment figures, ISM surveys, and US industrial production. In Canada, November jobs data are expected to show weakness as the US trade war pressures key sectors, and the Bank of Canada is expected to maintain its policy rate at 2.25 percent while forecasting a soft labor market. As December begins, Asia faces a busy week with manufacturing purchasing manager indexes and price indicators offering insight into regional momentum. Comments from Bank of Japan Governor Kazuo Ueda may hint at a possible December rate hike. Australia releases housing data and Q3 statistics on profits and inventories ahead of its GDP report, while South Korea publishes revised figures. Japan will release quarterly indicators including capital spending, sales, and profits, which will influence GDP revisions. Inflation and trade data from Indonesia and a broad set of PMIs across major Asian economies will assess manufacturing conditions. New Zealand releases its terms of trade, South Korea updates inflation, and Australia publishes current account and government spending figures. Later in the week, Japan releases portfolio-investment flows, Australia provides household spending data, and India is expected to cut its repo rate.
On Friday, South Korea will release current account data, Japan will report household spending, and the Philippines and Taiwan will publish inflation readings. Singapore’s retail-sales data will reveal whether recent momentum continued. In the UK, the Bank of England is expected to highlight newly emerging financial stability risks, with Governor Andrew Bailey addressing concerns that echo global discussions about stock bubbles and subprime-like risks. Switzerland is expected to report another near-zero inflation reading, while Sweden’s consumer-price growth is anticipated to weaken to a six-month low. Across the euro-zone, manufacturing data will be reviewed, including German factory orders and industrial production from France and Spain. Ukraine is preparing its 2026 budget under IMF pressure, while Poland’s central bank weighs another rate cut after recent reductions. Data from South Africa is expected to show Q3 growth slowing to 0.5 percent as US tariffs impact manufacturing. Saudi Arabia will unveil its 2026 budget, and Turkey is expected to report inflation easing to around 31.6 percent, raising expectations for a meaningful rate cut in December. Emerging data suggest Brazil’s 16-quarter expansion — its longest in three decades — may have ended in Q3, due to tight monetary policy and US tariffs. Mexico is expected to show widening output gaps and slowing momentum, with manufacturing, confidence, consumption, and employment all weakening. Andean economies will release inflation data, with Chile potentially seeing cooling CPI that may justify a quarter-point cut on Dec. 16, while Peru’s inflation may dip slightly and Colombia could see modest deceleration from October’s 5.51 percent reading.
