As expected, the European Central Bank (ECB) reduced its key rate by 0.25%. Market expectations were low, and the ECB confirmed that growth faces downside risks. It is aiming for a neutral rate of 2.5% by next summer. This did not bring anything new to the market.
The question of State debts remains important: the gap between the borrowing rates of France and Germany is stabilizing, while that between Italy and Germany has reached a three-year low, despite the fact that the ECB is selling Italian bonds. Everything is calm for the ECB at the end of the year.
On the Canadian side, the Bank of Canada (BoC) surprised with a 0.5% reduction in its key rate. We expect at least three more cuts of 0.25% in 2025, which would bring the neutral rate down to 2.5% by June. However, if the economic situation continues to deteriorate, the BoC could cut rates even further.
Read also: The Chinese yuan loses ground against the dollar
For the Swiss National Bank (SNB), a little surprise: it reduced its key rate by 0.5%, while everyone was expecting a reduction of 0.25%. The new governor, Mr. Schlegel, seems to want to revive inflation by weakening the Swiss franc. What is surprising is that the SNB no longer speaks of the Swiss franc as “too strong”, even though this remains a problem in the fight against deflation.
Finally, in Australia, the Reserve Bank has not changed anything in its monetary policy. But its press release suggests that inflation could fall, paving the way for a possible rate cut as early as next February, in the most optimistic scenario.
Belgium
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