Attention Shared by Central Bank Decisions & Year-end Data Deluge
December 17, 2025
The dollar rose overnight, led by gains of 0.5% against yen and sterling. The U.S. currency also appreciated 0.2% against the Australian currency and Mexican peso and 0.1% relative to the Swiss franc, euro, kiwi and won. Gold is 0.7% stronger, whereas Bitcoin has softened 0.4%. The price of gold bounced up 1.5%.
Ten-year sovereign debt yields dropped five basis point in the U.K. but otherwise show increases of three bps in Italy, two bps in Germany, France and Spain and a single basis point in the United States and Japan.
Stock markets this Wednesday have experienced mixed fortunes, climbing 1.6% in Great Britain, 1.2% in China, 1.4% in South Korea, and so far 1.0% in Italy but falling 0.8% in Australia and 0.9% in New Zealand. The DOW, Nasdaq and SPX are marginally softer, and so are the German and French exchanges.
The dispersion of opinion among Fed officials remains on display, with N.Y. District President Williams calling the current stance “well positioned” but Governors Miran and Waller expressing a preference for deeper interest rate cuts.
The flurry of late-2025 monetary policy reviews continues with rate cuts in Pakistan of 50 bps, Chile of 25 bps and Thailand also of 25 bps and decision to leave key rates unchanged at 6.5% in Hungary, 4.75% in Indonesia, and 8.0% in Georgia. Pakistan’s eighth reduction so far lowers its interest rate to 10.5% versus a peak of 22.0% maintained for a year prior to June 2024. The new Chilean rate of 4.5% was only the second adjustment in 2025 but represents a steep cumulative drop from a peak of 11.25% between October 2022 and July 2023. Total consumer price inflation in Thailand was negative at -0.5% last month, and its new 1.25% rate level is its lowest in three years and half the peak of 2.5% from September 2023 until an initial cut in October 2024. Bank Indonesia has undertaken six 25-basis point interest rate reductions since September 2024, but officials at the bank continue to attach high priority to supporting the rupiah. The National Bank of Georgia’s interest rate has been at 8.0% since a 25-basis point cut in May 2024. A cautious and slightly restrictive stance is warranted in light of a rebound of CPI inflation from zero percent at the start of 2024 to a reading of 4.8% last month.
A slew of additional interest rate decision will be learned over the next two days, including announcements by the European Central Bank, Bank of England and especially the Bank of Japan.
On the data release front, there has been continuing buzz about yesterday’s labor market figures, confirming a weaker picture. The 4.6% jobless rate last month was up from 4.0% last January and a trough of 3.4% in April 2023. The U-6 combined rate of un- and underemployment jumped to 8.7% in November from 7.7% at mid-year, and the 12-month 3.5% increase in average hourly earnings was its smallest advance in 54 months. U.S. consumer consumer confidence has been depressed for some time, and now retail sales have experienced back-to-back readings of +0.1% in September and no change in October. An encouraging 4.8% jump in mortgage applications during the week of December 5 has now been fully neutralized by a 1.4% drop in the week before and of 3.8% in the week afterward.
The case for raising the Bank of Japan’s interest rate was enhanced by news of a much stronger-than-anticipated 7.0% jump in core domestic machinery orders during October and a larger-than-forecast 6.1% increase of customs-basis exports in November. Also, Japan’s core purchasing managers index has been above the 50 neutral level in each of the past four reports.
Consumer price inflation in Euroland last month was revised down 0.1 percentage point to 2.1%, matching October’s reading, and labor cost pressure slid to a 3-year low of 3.3% last quarter. Core inflation was at 2.4% in each of the last three months, however. investor sentiment according to the monthly ZEW Institute surveys improved to 5-month highs in the euro area and Germany. But the German IFO Institute’s business climate survey revealed an absence of optimism about prospects over the coming six months. The bloc of euro users experienced a much wider EUR 18.4 billion trade surplus in October than a that of EUR 7.1 billion a year earlier, but the January-October surplus of EUR 144.6 billion was still 0.3% wider than a year before.
British CPI inflation slowed to an 8-month low of 3.2% last month. Producer output inflation was also at a 3-month low (3.4%), and the orders sub-index of the monthly CBI industrial trends survey rose five points in November but stayed depressed with a reading of minus 32, only 8 points better than the end-2024 reading of -40.
Copyright 2025, Larry Greenberg. All rights reserved.
Tags: Bank Indonesis, Bank of Chile, Bank of Thailand, British CPI, Euroland CPI and labor costs, Japanese machinery orders, National Bank of Georgia, National Bank of Hungary, State Bank of Pakistan, U.S. labor market statistics
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