Take Two: Fed and ECB hold rates; COP28 deal agreed
- 18 December 2023 (3 min read)
What do you need to know?
The US Federal Reserve (Fed) kept interest rates at their 22-year high at between 5.25% and 5.50% by unanimous decision at its December meeting, in line with market expectations. The Fed acknowledged the softer backdrop, stating “growth of economic activity has slowed from its strong pace in the third quarter”. However, Fed projections showed the majority of its rate-setting Federal Open Market Committee expect three rate cuts in 2024 while Fed Chair Jerome Powell said rates were “likely at or near” their peak – a message US markets welcomed as the Dow Jones index closed at a record high.
Around the world
The European Central Bank (ECB) also held fast and left its key interest rate unchanged at 4.0%. Policymakers acknowledged that while inflation eased to 2.4% in November, it may increase in the near term, before returning to its 2% target. As expected, it cut its inflation forecasts, and anticipates inflation will have averaged 5.4% in 2023, before dropping to 2.7% in 2024, and 2.1% in 2025. Elsewhere, the Bank of England kept interest rates at their 15-year high of 5.25% and indicated they will remain at these levels for an extended period, despite inflation easing to 4.6% in October.
Figure in focus: 50%
Argentina’s new government has devalued its currency, the peso, by more than 50% in a bid to tackle its economic crisis. The South American country is struggling with, among other factors, huge public debt and soaring inflation – with its annual rate at some 150%. Deep spending cuts were also announced, including a reduction in fuel subsidies and a freeze on some major government contracts. The move was welcomed by the International Monetary Fund - which Argentina owes US$44bn – as its managing director Kristalina Georgieva said it was "an important step toward restoring stability and rebuilding the country's economic potential”.
Words of wisdom: “Transitioning away”
Following prolonged negotiations at the COP28 climate summit, nearly 200 countries approved a plan explicitly calling for the “transitioning away from fossil fuels”, for the very first time in the events near 30-year history. The text called on nations to transition “in a just, orderly and equitable manner, accelerating action in this critical decade, so as to achieve net zero by 2050 in keeping with the science”. Notably however, it did not say to “phase them out”, which many were calling for. The latest agreement follows an initial draft which was widely criticised and described as “grossly insufficient”.
What’s coming up?
Monday sees Germany publish its Ifo Business Climate index for December, a closely watched indicator of the country’s economic health. On Tuesday the Bank of Japan meets to set interest rates and the Eurozone announces its final inflation numbers for November. The UK follows with its own inflation data on Wednesday, while on Thursday the US issues a final estimate for third quarter (Q3) GDP growth. On Friday Japan updates on inflation and the UK publishes final Q3 GDP growth numbers.
Related articles
View all articles
What will it take?
- by
- 06 May 2024 (10 min read)
Brick by Brick: Unravelling China's property Puzzle
- by
- 02 May 2024 (10 min read)
Causes and FX
- by
- 29 April 2024 (10 min read)
Disclaimer
The information on this website is intended for investors domiciled in Switzerland.
AXA Investment Managers Switzerland Ltd (AXA IM) is not liable for unauthorised use of the website.
This website is for advertising and informational purpose only. The published information and expression of opinions are provided for personal use only. The information, data, figures, opinions, statements, analyses, forecasts, simulations, concepts and other data provided by AXA IM in this document are based on our knowledge and experience at the time of preparation and are subject to change without notice.
AXA IM excludes any warranty (explicit or implicit) for the accuracy, completeness and up-to-dateness of the published information and expressions of opinion. In particular, AXA IM is not obliged to remove information that is no longer up to date or to expressly mark it a such. To the extent that the data contained in this document originates from third parties, AXA IM is not responsible for the accuracy, completeness, up-to-dateness and appropriateness of such data, even if only such data is used that is deemed to be reliable.
The information on the website of AXA IM does not constitute a decision aid for economic, legal, tax or other advisory questions, nor may investment or other decisions be made solely on the basis of this information. Before any investment decision is made, detailed advice should be obtained that is geared to the client's situation.
Past performance or returns are neither a guarantee nor an indicator of the future performance or investment returns. The value and return on an investment is not guaranteed. It can rise and fall and investors may even incur a total loss.
AXA Investment Managers Switzerland Ltd.