A construction worker paints an eagle on the Mariner S. Eccles Federal Reserve Building, the main office of the Federal Reserve Board, on September 16, 2025 in Washington, DC.
Kevin Dietch | Getty Images
Christmas cut?
Fast forward a few weeks and the Christmas cut is back on the table.
Berenberg noted that the recent rise in the unemployment rate is enough to prompt Fed officials to cut interest rates by 25 basis points next week. On Friday, Morgan Stanley withdrew its call for a quarter-point cut in December, with strategists saying, “We appear to have jumped the gun.” JPMorgan and Bank of America also expect rate cuts based on recent dovish behavior from Fed officials.
When the Fed sneezes…
So how will this dovish shift play out internationally? First, the Swiss National Bank will announce its policy decision on Thursday. Despite the recent slowdown in inflation and GDP growth, the overwhelming expectation is that the Swiss National Bank will keep interest rates unchanged at 0.00%.
However, Nomura predicted that prices and growth rates would rise in 2026, adding, “The hurdles to negative policy interest rates are high.” This view is echoed by BNP Paribas, whose economists expect the SNB to remain unchanged until the second half of 2027 in a recent note.
mixed message
The situation is different for the Bank of England. The Monetary Policy Committee will meet on December 18th, but opinions are divided on its next move.
T. Rowe Price believes a rate cut is likely, predicting a further deterioration in the labor market in the coming months and expecting rates to fall to the 3% floor in 2026. But Berenberg said the conditions for a rate cut would not be met by the December meeting and would instead be in the new year.
Megan Green, the Bank of England’s rate-setter, told CNBC that stubborn inflation and labor market trends will likely delay any rate cuts for some time.
Do you think the ECB will maintain its policy and the Bank of Japan will raise interest rates?
The European Central Bank is also preparing for its last interest rate-setting meeting of the year. After keeping interest rates unchanged at 2% for the second consecutive time in October, Deutsche Bank believes that interest rates are likely to remain unchanged until energy-driven inflation undershoots in 2026.
Finally, multiple reports from Reuters and Bloomberg suggest that the Japanese government will not try to prevent the central bank from raising interest rates in the coming weeks, and it looks like the Bank of Japan could raise rates in December. But this could lead to more volatility, especially in the bond market, where the 10-year Treasury yield has risen to its highest level since 2007.
December central bank events:
December 10th: Federal Reserve Board Policy Decisions
December 11: Swiss National Bank policy decision
December 18: Bank of England policy decision
December 18: European Central Bank policy decision
December 19: Bank of Japan policy decision
