NAB Morning Call Central Banks Deck the Halls with Cuts and Holds
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Dec 18, 2025 Gavin Friend, a London-based NAB Markets economist, dives into the latest central bank maneuvers impacting global markets. He analyzes the Bank of England's narrow rate cut decision and the ECB's cautious stance amid uncertain forecasts. The discussion also reveals Germany's potential growth rebound, the Bank of Japan's expected rate hike, and the implications of US inflation data. Lastly, Friend highlights New Zealand's surprisingly strong GDP, hinting at possible shifts in fiscal policy as we head into the new year.
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BoE Cut Was Narrow But Signal Matters
- The Bank of England cut 25bps to 3.75% in a razor‑thin 5-4 decision that felt hawkish despite easing.
- Gavin Friend expects gradual further easing in H1 2026 as inflation continues towards target.
ECB Stays Patient Amid Uncertainty
- The ECB held rates and emphasised uncertainty, revising medium‑term inflation forecasts only slightly upward.
- Lagarde flagged many unknowns so policy is likely on hold while data and headwinds are reassessed.
Nordic Rates Diverge Gradually
- Norges Bank and the Riksbank held rates, reflecting sticky inflation in Norway and a low Swedish rate path.
- Norges will cut gradually next year; Sweden may face hikes but likely not until 2027.