Take two: ECB cuts rates again; US inflation ticks higher
- 16 December 2024 (3 min read)
What do you need to know?
The European Central Bank (ECB) cut its deposit rate by 25 basis points (bp) for the fourth time this year, taking its benchmark rate to 3.00%. Since June the ECB has delivered 100bp of cuts as inflation has fallen back towards its 2% target. The latest reading showed Eurozone annual inflation rose to 2.3% in November from 2.0% in October. In a statement the ECB said that it is “determined to ensure that inflation stabilises sustainably at its 2% medium-term target”. It added that it will follow a “data-dependent and meeting-by-meeting approach” to determine the appropriate monetary policy stance. Elsewhere the Bank of Canada cut interest rates by 50bp to 3.25%.
Around the world
US annual inflation edged higher again to 2.7% in November, up from 2.6% in October and ahead of September’s three-year low of 2.4%. Meanwhile, core inflation, which excludes more volatile food and energy prices, remained unchanged at 3.3%. Despite the rise in headline inflation, which was in line with market forecasts, it is still widely expected that the Federal Reserve (Fed) will announce its third interest rate cut of 2024 when it meets this week. AXA IM expects a 25-basis-point cut at both the Fed’s December and March meetings, before pausing until mid-2026.
Figure in focus: 1.6°C
This year is set to be the hottest on record following an exceptionally warm November, with the average global surface temperature expected to reach 1.6°C above pre-industrial levels - well ahead of 2023’s previous record of 1.48°C. The data, from the European Union’s Copernicus Climate Change Service, represents the first year with an average temperature of more than 1.5°C above pre-industrial levels – the threshold established in the Paris Agreement, the international treaty on climate change. The Agreement came into force on 4 November 2016 with the goal of keeping global warming “well below” 2°C above pre-industrial levels but ideally nearer to 1.5°C.
Words of wisdom
Politburo – The highest political body of China’s Communist Party. Last week, the Politburo pledged to relax its monetary policy stance for the first time in 14 years, as it seeks to boost the country’s slowing economy. China has experienced a downturn in economic activity amid an ongoing housing crisis, leading officials to say they would move their stance on monetary policy from “prudent” to “moderately loose”. Earlier this year, Beijing pledged several fiscal and monetary stimulus measures to help shore up the world’s second-largest economy. Separate figures last week showed China imports fell sharply by 3.9% year-on-year in November, reflecting weak domestic demand.
What's coming up?
Several key central bank meetings take place this week, with the Fed meeting to decide on monetary policy on Wednesday, followed by the Bank of Japan and Bank of England on Thursday. Flash Purchasing Managers’ Indices covering December are published on Monday for the Eurozone, US, UK and Japan. On Tuesday, Germany's closely watched Ifo Business Climate Index is issued while Canada reports latest inflation data followed by Eurozone inflation on Wednesday. The US reports its final estimate of third quarter GDP growth on Thursday.
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