Highlights for Next Week in the Global Market: The Super Central Bank Week Is Coming, and the Fed's Favorite Inflation Indicator Will Be Released

Next week, the Federal Reserve will announce its last interest rate decision of the year, and U.S. stocks will face a test after hitting new highs. In addition, central banks in Japan, the UK, Russia, Thailand, the Philippines, Norway, and Sweden will also make interest rate decisions.

 

The significant rally in tech stocks has pushed the NASDAQ Composite Index to break through the 20,000-point mark for the first time this week, which is another milestone for U.S. stocks. Over the past year, the NASDAQ has risen by 32%, while the S&P 500 Index has increased by approximately 27%.

 

Expectations of the Fed's interest rate cuts have supported these upward trends. However, although the Fed is expected to cut interest rates by another 25 basis points next week, due to strong economic growth and persistently high inflation, investors have reduced their bets on the magnitude of rate cuts by policymakers next year.

 

The market is now paying more attention to the prospects of future interest rate cuts, especially considering the uncertainties that may arise from a series of policies of the incoming President Trump. Data from LSEG shows that the U.S. money market expects a 94% probability of an interest rate cut in December. However, throughout 2025, they expect only two more interest rate cuts.

 

Brad Bechtel, an analyst at Jefferies, said in a report, "The interest rate cut in December is almost a certainty, but after that, the pace of rate cuts will surely slow down."

 

Generali Asset Management expects that the Fed will emphasize that it will decide whether further monetary policy easing is needed based on future economic data, and such actions will be cautious and gradual.

 

Analysts at BNP Paribas said that they expect a "hawkish rate cut," and the Fed may open the door to a pause in further rate cuts, and the length of the pause has yet to be determined.

 

Recent economic data shows that the U.S. economy remains robust. And the focus of next week's data will be the November Personal Consumption Expenditures (PCE) Price Index, which is the Fed's favorite inflation indicator.

 

As the year-end approaches, other data will provide further information on the state of the economy. This includes manufacturing indexes, retail sales data, initial jobless claims, and consumer confidence indexes.

 

The Bank of England will announce its interest rate decision next Thursday. The market generally expects the Bank of England to keep its policy rate unchanged at 4.75% and adhere to a gradual interest rate cut policy. The money market shows that there is an 85% probability that the Bank of England will keep the interest rate unchanged this month, and the probability of an interest rate cut at the February meeting next year is much higher.

 

Before Thursday's decision, the UK's November CPI inflation is expected to rise again, which will add to the reasons for the Bank of England to keep the interest rate unchanged this month.

 

Regarding the Bank of Japan, expectations for its interest rate hike are rising. Economists at Nomura Securities expect the Bank of Japan to raise interest rates by 25 basis points to 0.50% next week, but it is also possible to postpone it until January next year or even later.

 

Nomura said that if the Bank of Japan decides to abandon the interest rate hike in December due to uncertainties or fiscal policy considerations, the probability of taking action in January next year will be very high.

 

 

In terms of geopolitics, with the downfall of the Assad regime, Israel may intensify its strikes against Hezbollah and Hamas. And because of Iran's weakened position in the region, the Israeli military is preparing to attack Iran's nuclear facilities.

 

The incoming U.S. President Trump recently said that he does not rule out the possibility of the United States going to war with Iran. "Anything can happen. Anything can happen. It's a very unstable situation."

 

People familiar with the matter said that Trump's transition team is formulating a so-called "Maximum Pressure 2.0" strategy against the Iranian regime, which is a continuation of his Iran policy centered on severe economic sanctions during his first term.

 

 

Monday: Year-on-year growth of China's total retail sales of consumer goods in November, year-on-year growth of China's value-added of industrial enterprises above a designated size in November, the initial value of the euro zone's manufacturing PMI in December, the initial value of the UK's manufacturing PMI in December, the New York Fed's manufacturing index in December in the US, the initial value of the S&P Global manufacturing PMI in December in the US, and a speech by Christine Lagarde, President of the European Central Bank.

 

Tuesday: The UK's unemployment rate in November, Germany's IFO Business Climate Index in December, Germany's ZEW Economic Sentiment Index in December, the euro zone's ZEW Economic Sentiment Index in December, Canada's CPI monthly rate in November, the US's retail sales monthly rate in November, the US's industrial output monthly rate in November.

 

Wednesday: API crude oil inventories in the US for the week ending December 13, the UK's CPI monthly rate in November, the final annual rate of the euro zone's CPI in November, the annualized number of new housing starts in the US in November, the US's current account in the third quarter, EIA crude oil inventories in the US for the week ending December 13.

 

Thursday: The Federal Reserve's interest rate decision as of December 18 in the US, the share of China's RMB in global payments in November as measured by SWIFT, Germany's Gfk Consumer Confidence Index in January, the Bank of England's interest rate decision as of December 19, the number of initial jobless claims in the US for the week ending December 14, the final annualized rate of the US's real GDP in the third quarter, the annualized number of existing home sales in the US in November, the US's Conference Board Leading Economic Index monthly rate in November, EIA natural gas inventories in the US for the week ending December 13, a monetary policy press conference held by Federal Reserve Chairman Jerome Powell, the Bank of Japan's target interest rate as of December 19.

 

Friday: China's one-year Loan Prime Rate as of December 20, the UK's seasonally adjusted retail sales monthly rate in November, the US's core PCE price index annual rate in November, the US's personal expenditure monthly rate in November, the final value of the University of Michigan's Consumer Confidence Index in December in the US, the Russian Central Bank's announcement of its interest rate decision.