Europe’s Final Rate Decisions of the Year: One Cut, Three Holds Expected

BOE to Cut by 25bp...
ECB, Sweden, and Norway to Hold Rates Steady

Four major central banks in Europe are set to announce their interest rate decisions on December 18 (local time). As this will be the final policy rate decision of the year, the market expects that only the United Kingdom will cut its rate.

According to U.S. economic media outlet CNBC on December 17, the European Central Bank (ECB), Bank of England (BOE), Sweden's central bank Riksbank, and Norway's central bank (Norges Bank) are scheduled to hold monetary policy meetings on December 18.

European Central Bank headquarters in Frankfurt, Germany. Photo by AFP Yonhap News

The ECB is expected to keep its rate unchanged at 2.15%, as recent economic indicators do not suggest a need for adjustment. Investors' attention is expected to focus more on internal tensions within the Governing Council than on the rate itself. Some members, such as Isabel Schnabel, have publicly supported the market's view that the next rate move will be a hike, while other members still believe there is room for a rate cut.

Christian Kopf, Head of Fixed Income Portfolio Management at Union Investment, stated, "We do not expect any rate changes in the eurozone for the time being," adding, "If there is any change, the most likely timing would be a rate hike at the end of 2026 or the beginning of 2027."

Additionally, the ECB is expected to raise its eurozone growth forecast at this meeting. It will also release new staff projections for the economy.

The BOE is expected to be the only one among the four banks to cut its rate. CNBC forecasts that the current policy rate of 4% will be reduced by 25 basis points (1bp = 0.01 percentage point) to 3.75%.

Expectations for a rate cut in the UK have increased as the consumer price index (CPI) inflation rate fell to 3.2% last month, economic growth has been sluggish, and the unemployment rate has risen. Although inflation remains above the BOE's target of 2%, CNBC noted that the downward trend provides room for a rate cut. In addition, the UK government's autumn budget announced last month included measures such as lower energy bills and freezes on fuel and rail fares, which are expected to help stabilize prices and support a rate cut.

For Norway's central bank, the dominant outlook is that the policy rate will be kept unchanged at 4%. Economists believe it is unlikely that a rate cut will occur before the summer of 2026.

Morten Lund, Chief Scandinavia Economist at JP Morgan, said that a message is likely to be delivered to temper market expectations for a rate cut in March. He expects the next rate cut to come in June, but believes the bank will not specify the timing clearly.

Sweden's Riksbank is expected to keep its policy rate unchanged at the current 1.75%. Franziska Fischer, European Economist at UBS, said that Riksbank's rate cut cycle has already ended and projected that there will be no change in rates in the next quarter as well.