All Eyes on the Federal Reserve
December 10, 2025
This week’s FOMC meeting, whose interest rate announcement today will be made at 14:oo EST and likely involve a 25-basis point cut, is the last one of 2025. The first three scheduled meetings next year (Jan 27-28, Mar 17-18 and Apr 28-29) will be chaired by Jerome Powell. The appointed identity of Powell’s successor could be revealed by President Trump any day now and be subject to senate approval. Trump wants a significantly lower rate than the current 3.75-4.00% range. After a 9-month pause in easing, cuts of 25 bps each were made at the prior two FOMC reviews, but policymakers had widely divergent and strongly held opinions on where to go from here. Updated macroeconomic forecasts and a fresh dot-plot diagram of individual interest rate path preferences on the FOMC will be revealed at 14:00, too, and then Powell’s press conference will be closely watched for clues to future decisions.
Meanwhile, the Bank of Canada’s overnight policy interest rate was left unchanged at 2.25% following today’s scheduled review today. That’s its lowest level since July 2022 and represents a cumulative decline of 275 basis points since June 2024. Today’s decision was not a surprise, since officials after its last cut (25 basis points in October) asserted that 2.25% appeared to be an appropriate end-point if growth and inflation evolve from here as they expect. In keeping the interest rate at 2.25%, they retained the same views about likely growth and inflation. Canada’s economy expanded faster than had been assumed during the summer quarter. Inflation is a tad above the 2% target, and tariff uncertainty and a fragile geopolitical relationship with the United States warrant caution.
There has been one central bank rate cut today already announced, and that comes from Azerbaijan. The reduction of 25 basis points to 6.75% was the seventh cut since November 2023 from a peak up to then of 9.0%. Consumer price inflation fell from from a high of 15.6% in Sept-Oct of 2022 to zero percent by April 2024, returned to as high as 6.3% in April-May of this year, but has slowed anew to 5.5% last month, which lies within the central bank’s 2-6% target range. Economic growth this year has been a tad short of 1.5%.
Later today but well after the Fed show in the United States, a rate decision will be announced by the Central Bank of Brazil. Officials there are expected to keep their Selic interest rate at 15.0%, which would be the fourth no-change decision in a row. Previously, the Selic rate had been raised by 450 basis points between September 2024 and June 2025.
In financial markets overnight, the dollar slipped 0.4% against the Swiss franc, 0.3% versus the Japanese yen and 0.1% relative to the euro. Prices for Bitcoin, oil and gold had dropped by 0.9%, 0.8% and 0.2%. Ten-year sovereign debt yields had drifted two and one basis points lower in the United States and Japan, respectively, but were up two basis points in France and Italy and by a basis point in the U.K., Germany and Spain. U.S. equities had opened marginally lower. Stock markets closed down by 1.2% in Hong Kong and 0.2% in South Korea and China but up 0.2% in Japan and were sporting mild declines in Euroland’s big three members of Germany, France and Italy.
Reported November price data this Wednesday included
- A half-percentage point acceleration of Chinese consumer price inflation to a 21-month high of 0.7%.
- A sub-zero Chinese rate of producer price inflation (-2.2%) for the 27th month in a row.
- Unchanged domestic PPI inflation in Japan of 2.7% along with a 1.8% on-year rise in import prices.
- A 14-month low in Brazilian consumer price inflation of 4.46%.
- 2.1% CPI inflation in Denmark, matching October’s 2-month low.
- A 5-month low in Norwegian CPI inflation of 3.0%, down from September’s 7-month high of 3.6%.
- The lowest Czech CPI inflation (2.1%) since April’s 85-month trough of 1.8%, having peaked in 2022 at 18%.
Industrial production figures were also released by a number of economies. Italy experienced greater-than-expected weakness in the industrial sector, which dropped 1.0% on month and 0.3% on year in October. That month saw Turkish industrial production fall 0.8% and record its smallest year-on-year rise in eight months. Between October 2024 and October 2025, industrial production declined 2.0% in Slovenia, 3.8% in Slovakia, and 7.7% in Bulgaria but rose 3.3% in Austria.
South African retail sales increased in October by 0.9% on month and 2.9% on year. In Indonesia, retail sales rose 0.6% on month and by a 3-month high 4.3% compared to a year earlier.
Copyright 2025, Larry Greenberg. All rights reserved.
Tags: Bank of Canada, Central Bank of Azerbaijan, Chinese CPI and PPI
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