At Any Rate
Global Rates: European rates 2025 outlook
Nov 27, 2024
Aditya Chordia and Khagendra Gupta, both analysts at J.P. Morgan Global Research, dive into the future of the European rates market for 2025. They discuss potential macroeconomic scenarios impacting rates, along with insights on intra-EMU spreads and the evolving political landscape in France. The duo examines the dynamics of German swap spreads and important regulatory trends. They also predict euro volatility tied to the European Central Bank's easing measures, while evaluating the Bank of England's monetary policy and its potential effects on bond yields.
18:30
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Quick takeaways
- The European rates market is likely to experience a modest easing in 2025, contingent on potential economic shocks.
- Despite high interest rates, the euro area's inflation is expected to stabilize at around 2% by late 2025, influencing bond demand.
Deep dives
Macro Outlook for 2025
The macroeconomic outlook for 2025 projects a continuation of global expansion, albeit at a modest pace, with high interest rates persisting. In Europe, while further rate hikes are deemed unlikely, the potential for quicker easing exists if there are significant shocks to employment or growth. The dynamics of US election outcomes add complexity to the EU's outlook, suggesting a slower trajectory for central bank easing compared to both the US and euro area. Overall, a divergence in policy rates is anticipated, particularly between the US and European markets.
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