Three holds and a cut? Europe’s central banks are about to make their final calls of 2025
A projected illumination marking the 75th anniversary of the Schuman Declaration, on the Grossmarkthalle building at the European Central Bank headquarters in Frankfurt, Germany, on May 9, 2025.
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Investors are gearing up for the last interest-rate decisions of 2025, with four of Europe’s central banks announcing their monetary policies and macroeconomic outlooks on Thursday.
The European Central Bank, Bank of England, Riksbank, and Norges Bank are all meeting, but only one of them is expected to change its rate.
This is what to expect:
European Central Bank
The ECB is expected to keep rates on hold, with recent economic data not pointing to an adjustment.
But investors will be more interested in any commentary on the apparent growing tensions inside the governing council, with some members, like Isabel Schnabel, openly endorsing the market’s view that the next rate move will be a hike, while others think there is still room to cut.
Christian Kopf, who heads the bond portfolio management of German asset manager Union Investment, told CNBC: “I don’t expect and rate change in the Euro area for the time being. If there is a change in 2026, most likely we will get a rate hike towards the end of 2026 or at the beginning of 2027.”
The ECB is expected to hike its growth outlook for the Eurozone when publishing its new round of staff projections, its in-house economic forecasts.
CNBC will be covering the ECB’s monetary policy decision from 1 p.m. London time, with guests including Lorenzo Codogno, founder of Lorenzo Codogno Macro Advisors, and Al Cattermole, Fixed Income portfolio manager at Mirabaud Asset Management.
Norges Bank
Norway’s central bank is widely expected to keep rates on hold at 4% on Thursday, with economists suggesting the next rate cut might not come until summer 2026. Norges Bank announces its policy decision at 10 a.m. local time, 9 a.m. London time.
Morten Lund, Scandinavia chief economist at JPMorgan, commented that the bank’s guidance on Thursday “should be a push-back against markets’ rising expectations” that it will cut rates in March, which he said was currently seen as “a coin toss.”
Norges Bank
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Instead, JPMorgan expects a rate cut to next take place in June, although Norges Bank was unlikely to be explicit about the timing of a cut.
“Forward guidance should remain vague, stating that ‘if the economy evolves broadly as currently projected, the policy rate will be reduced further in the course of the coming year’. We also think that the Governor will say that inflation remains too high and repeat the sentence that “we are not in a hurry to reduce the policy rate’,” Lund added.
CNBC will be interviewing Ida Wolden Bache, the governor of Norges Bank, at 12.10 p.m. London time, 1.10 p.m. CET.
Riksbank
Sweden’s central bank is expected to keep its key policy rate unchanged at 1.75% when it announces its decision at 9.30 a.m. CET, 8.30 a.m. London time.
No change is likely in the coming quarters either, according to Franziska Fischer at UBS Investment Bank, who said that the Riksbank’s easing cycle was over.
The Swedish flag hangs on the country’s central bank.
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“The Riksbank cut the policy rate by 25 basis points in September but remained on hold in November, while signalling that the policy rate will likely remain unchanged ‘for some time to come’,” Fischer said.
Developments since November do not warrant a change to the rate outlook, in UBS’ view, he added.
CNBC will be interviewing Erik Thedeen, Riksbank governor, on Thursday at 1.20 p.m. CET, 12:20 p.m. London time.
Bank of England
The Bank of England is the only central bank that’s expected to cut interest rates on Thursday, with a small majority of the bank’s nine-member monetary policy committee (MPC) expected to opt for a 25 basis points cut, bringing the base rate down to 3.75%.
Expectations of a cut rose after the latest inflation data showed it fell sharply to 3.2% in November, and recent downbeat economic data in the U.K., ranging from somber growth figures to an uptick in unemployment.
A decorated Christmas tree outside The Royal Exchange near the Bank of England (BOE) in the City of London, UK, on Monday, Dec. 16, 2024. The British central bank is expected to leave rates unchanged at 4.75% at its meeting on Thursday and maintain its guidance that a “gradual approach to removing policy restraint remains appropriate.” Photographer: Jason Alden/Bloomberg via Getty Images
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While inflation remains above the bank’s 2% target, the trend downwards gives the bank room for manoeuvre when it comes to lowering interest rates to stimulate the economy, consumption and borrowing.
The government’s Autumn Budget last month was also seen as disinflationary, given it included measures to lower energy bills and freeze fuel duty and train fares.
CNBC’s “Decision Time” program at 12 p.m. London time for live coverage of the BOE’s decision. Karen Tso will be joined in the studio by Jack Meaning, U.K. chief economist at Barclays, on what the decision means for the economy, markets and consumers.
