Εβδομαδιαία Επισκόπηση: Διεθνής Οικονομία & Αγορές, 09/12/25
The Federal Reserve is likely to cut interest rates, albeit investors will also focus on macro projections and guidance
At the upcoming Federal Reserve (“Fed”) meeting on December 10th, both analysts’ and investors’ expectations point to a -0.25% interest rate cut for a 3rd consecutive meeting, to a range of 3.50% - 3.75%.
Attention will also turn to the forward guidance. Recall that the meeting on Wednesday will be accompanied by the Federal Open Market Committee (FOMC) members’ economic projections and their assessments for the appropriate monetary policy path, conducted on a quarterly basis.
Note that in September, the median FOMC projection pointed to 3.6% for the FFR at end-2025 and 3.4% (implying a range of 3.25% - 3.50%) at end-2026. Market expectations according to FFR futures pricing, lean towards a target range of 3.00% - 3.25% at end-2026.
At the same time, odds have risen that the director of the US National Economic Council K. Hassett will be nominated by President Trump to succeed Mr. Powell as Chair of the Fed after the latter’s term ends on May 15th, 2026. Mr. Hassett appears to be a proponent of looser monetary policy. Having said that, some concerns for a possible more aggressive than warranted monetary policy easing have resurfaced, albeit so far financial markets’ inflation expectations remain well anchored.
Long-term government bond yields have increased significantly lately due to expectations for aggressive fiscal expansion (Japan, Germany), as well as due to hawkish comments by officials (see i.e. ECB’s Schnabel, “Quote of the Week”).
In Germany, the 10-year Bund increased by +11 bps in the past week. A further rise of +7 bps took place on Monday December 8th to 2.87%, a 9-month high, with 30-year bond yields climbing to their highest level since 2011 (3.47%). On a positive note, periphery bond spreads versus the Bund were little changed in France (72 bps at the 10-year tenor as of December 8th), Italy (70 bps, the lowest since September 2021) and Greece (60 bps, the lowest since August 2008).
Japanese government bond yields rose further to fresh multi-year highs, as the case is strengthening for a hike in the reference interest rate (current: +0.50%) by the Bank of Japan as soon as at its next meeting on December 19th. Specifically, the 10-year yield increased by +14 bps wow to +1.95%, the highest since July 2007 and its 30-year peer by +2 bps wow to +3.36%, having climbed up to 3.43% mid-week, a record (i.e. since 1999) high.
In the euro area, the latest CPI print will likely sustain the European Central Bank’s outlook that monetary policy is “in a good place” (Deposit Facility Rate: +2.00%). In the event, despite a slight acceleration of the headline to +2.2% yoy and the core standing at +2.4% yoy, underlying pressures overall appear in line with the medium term-target of +2%.
Finally, the OECD broadly retained compared with three months ago with its projections for global real GDP growth, at +3.2% in 2025 from +3.3% in 2024, followed by a deceleration to +2.9% in 2026, mainly in view of an assumed payback from a frontloading of trade and business investment in 2025, ahead of less benign global trade conditions. As that payback fades during 2026, global real GDP growth is envisaged to partially recover to +3.1% in 2027.
At the upcoming Federal Reserve (“Fed”) meeting on December 10th, both analysts’ and investors’ expectations point to a -0.25% interest rate cut for a 3rd consecutive meeting, to a range of 3.50% - 3.75%.
Attention will also turn to the forward guidance. Recall that the meeting on Wednesday will be accompanied by the Federal Open Market Committee (FOMC) members’ economic projections and their assessments for the appropriate monetary policy path, conducted on a quarterly basis.
Note that in September, the median FOMC projection pointed to 3.6% for the FFR at end-2025 and 3.4% (implying a range of 3.25% - 3.50%) at end-2026. Market expectations according to FFR futures pricing, lean towards a target range of 3.00% - 3.25% at end-2026.
At the same time, odds have risen that the director of the US National Economic Council K. Hassett will be nominated by President Trump to succeed Mr. Powell as Chair of the Fed after the latter’s term ends on May 15th, 2026. Mr. Hassett appears to be a proponent of looser monetary policy. Having said that, some concerns for a possible more aggressive than warranted monetary policy easing have resurfaced, albeit so far financial markets’ inflation expectations remain well anchored.
Long-term government bond yields have increased significantly lately due to expectations for aggressive fiscal expansion (Japan, Germany), as well as due to hawkish comments by officials (see i.e. ECB’s Schnabel, “Quote of the Week”).
In Germany, the 10-year Bund increased by +11 bps in the past week. A further rise of +7 bps took place on Monday December 8th to 2.87%, a 9-month high, with 30-year bond yields climbing to their highest level since 2011 (3.47%). On a positive note, periphery bond spreads versus the Bund were little changed in France (72 bps at the 10-year tenor as of December 8th), Italy (70 bps, the lowest since September 2021) and Greece (60 bps, the lowest since August 2008).
Japanese government bond yields rose further to fresh multi-year highs, as the case is strengthening for a hike in the reference interest rate (current: +0.50%) by the Bank of Japan as soon as at its next meeting on December 19th. Specifically, the 10-year yield increased by +14 bps wow to +1.95%, the highest since July 2007 and its 30-year peer by +2 bps wow to +3.36%, having climbed up to 3.43% mid-week, a record (i.e. since 1999) high.
In the euro area, the latest CPI print will likely sustain the European Central Bank’s outlook that monetary policy is “in a good place” (Deposit Facility Rate: +2.00%). In the event, despite a slight acceleration of the headline to +2.2% yoy and the core standing at +2.4% yoy, underlying pressures overall appear in line with the medium term-target of +2%.
Finally, the OECD broadly retained compared with three months ago with its projections for global real GDP growth, at +3.2% in 2025 from +3.3% in 2024, followed by a deceleration to +2.9% in 2026, mainly in view of an assumed payback from a frontloading of trade and business investment in 2025, ahead of less benign global trade conditions. As that payback fades during 2026, global real GDP growth is envisaged to partially recover to +3.1% in 2027.