Year-end monetary policy "main event": Four European central banks hold meetings on the same day, with only one expected to cut interest rates?

Investors are closely watching the final batch of interest rate decisions for 2025. On Thursday, four major European central banks will announce their monetary policy and macroeconomic outlook. The European Central Bank, the Bank of England, the Swedish Central Bank, and the Norwegian Central Bank are all set to hold policy meetings this week, with markets expecting only one of the four central banks to adjust its benchmark interest rate. Here is a summary of market expectations: European Central Bank Due to recent economic data not signaling a need for policy adjustments, the market expects the European Central Bank to keep its benchmark interest rate unchanged. The ECB will announce its interest rate decision at 21:15 Beijing time. However, investors are paying more attention to the increasing internal divisions within the Governing Council. Some members (such as Isabel Schnabel) openly agree with market views that the next rate adjustment will be an increase, while others believe there is still room for rate cuts. Christian Kopf, head of bond portfolio management at Union Investment in Germany, stated in an interview: "Short-term, I do not expect the Eurozone to adjust interest rates. If there is a change in 2026, the most likely scenario is to start raising rates at the end of 2026 or the beginning of 2027." Additionally, with the release of a new round of internal economic forecasts, the European Central Bank may revise upwards its Eurozone economic growth outlook. Norwegian Central Bank It is widely expected that the Norwegian Central Bank will announce keeping its benchmark interest rate at 4% at 17:00 Beijing time, with economists predicting the next rate cut to be postponed until the summer of 2026. Morten Lund, Chief Economist for J.P. Morgan in the Nordics, pointed out that the Norwegian Central Bank's policy guidance on Thursday "is expected to counter the market's increasing expectations of a rate cut in March". He stated that market expectations for a rate cut in March of next year are close to half. In contrast, J.P. Morgan expects the most likely timing for the Norwegian Central Bank to cut rates is in June of next year, although the central bank is unlikely to give a specific time. Lund added, "Forward guidance is expected to continue to be vague, such as 'if economic developments broadly match current forecasts, policy rates will gradually be lowered over the next year.' We also expect the central bank governor to reiterate that inflation levels remain high and emphasize once again that 'we are not in a hurry to cut rates'." Swedish Central Bank The Swedish Central Bank will announce its interest rate decision at 18:00 Beijing time, with the market expecting it to keep its key policy rate at 1.75%. Franziska Fischer of UBS Investment Bank stated that the easing cycle of the Swedish Central Bank has come to an end, and in the coming quarters, it is unlikely to adjust interest rates. She noted, "The Swedish Central Bank cut rates by 25 basis points in September and remained unchanged in November, signaling that the benchmark interest rate 'will remain stable for a period ahead'." Fischer added that UBS believes the changes in economic fundamentals since November are not sufficient to justify an adjustment in rate prospects. Bank of England The Bank of England is the only one of the four central banks expected to cut interest rates. Market expectations are that a slim majority of nine members of the Monetary Policy Committee of the Bank will support a rate cut of 25 basis points, lowering the benchmark interest rate to 3.75%. Expectations for a rate cut have increased due to a significant drop in inflation data in November - the inflation rate for that month decreased to 3.2%, combined with recent weak economic data in the UK (including sluggish growth data and rising unemployment rates), all contributing to the brewing shift in policy expectations. Although the inflation rate is still above the Bank's target of 2%, the downward trend has opened up space for policy adjustments, providing the Bank with the conditions to cut rates to stimulate economic growth, boost consumer spending, and increase the size of credit. In addition, the autumn budget released by the UK government last month is seen as having a dampening effect on inflation, with measures such as reducing energy bills, freezing fuel duty, and train ticket prices.