Macroeconomics: The Week Ahead: 15-19 December 2025

Week Ahead – Preview

A very busy week for central bank policy meetings sees the BoJ take top billing with an expected 25 bps rate hike, while the BoE’s MPC is expected to cut 25 bps in another very finely balanced vote, while the ECB and central banks in Norway and Sweden are seen on hold. Rate cuts are expected in Chile, Mexico and Thailand (-25 bps), but seen on hold in Colombia, Indonesia and Taiwan. Statistically, the US looks to November CPI and Non-farm Payrolls, along with October Retail Sales, as the UK awaits CPI, PPI, Unemployment, Wages, Retail Sales and PSNB. Elsewhere, G7 & India flash PMIs lead a long list of surveys which include the overnight Japan Q4 Tankan, as well as Germany’s Ifo Business Climate and UK GfK Consumer Confidence. Corporate earnings are sparse, as are government bond auctions. The ongoing negotiations to try and reach some form of peace agreement for the Ukraine, which will also be a key topic at the two-day regular EU Council of Leaders meeting, which will also feature discussions on the next multi-annual EU budget framework.

** Japan: The expected BoJ rate hike has been a long time in the making, and with real rates still very negative, there is no doubt that the BoJ will still be behind the curve. Per se, Ueda & Co will leave the door open to at least one further rate hike, though probably making it contingent on next year’s wage round, and rather less explicitly on the performance of the JPY. In addition to the BoJ branch managers’ report today on next year’s wage round (suggesting a pace of increase around the level of this year), the Q4 Tankan also made a very strong case for a rate hike, with very solid large company readings and CapEx expectations, and notable improvements for smaller companies, and little sign of any major headwinds from trade tensions. Ahead of the BoJ decision, November Trade data are forecast to see exports pick up to 5.0% y/y and Imports to 3.0%, with the expected -1.8% m/m dip in volatile Private Machinery Orders being a modest reactive correction to September’s 4.2% increase. Last but not least National CPI is expected to ease 0.1 ppt to 2.9% y/y headline and 3.0% y/y ex-Fresh Food & Energy, marking the 42nd month above target for headline, while core has been above target in 36 of the last 37 months. Transitory is certainly not a moniker that can be applied, even for a central bank that fought deflation for two decades.

** USA: Markets continue to price in two further rate cuts in 2026 against the Fed median expectation of just one, though there are obviously deep divisions on the FOMC, with the expectation that the US administration will do everything it can to ensure that the Fed board has an increasingly dovish hue. This week’s run of Fed speakers will likely underline the extent of those differences of opinion. But with both CPI and labour data for November (i.e. timely) due this week, there is considerable event risk. Parsing the labour report will be a little more complicated, with a full report for November, but only partial data for October. But forecasts assume a 50K increase in Nov Payrolls, and the Unemployment Rate to rise to 4.5% from September’s 4.4%, the latter effectively a post hoc validation for last week’s rate cut, even if one would have to underline that the September rise was primarily due to a rise in the size of the labour force. The chances of an outlier, which may well see a sizeable revision in later editions of the report, especially as the reliability of the data will be open to question, advises against grandstanding about labour market trends. But markets are always fond of binary judgements, even if the accompanying rationale for price reaction may look to be a case of self-serving cherry picking of the full report. CPI is expected to have edged up to 3.1% y/y in November from September’s 3.0%, which would be the highest reading since May 2024, while core is seen unchanged at 3.0% y/y, i.e. in the middle of the range 2.8/3.3% range that has been in place over the past year, and clearly not indicative of a disinflationary trend. Gasoline and Autos are expected to be a bit of a drag on headline Retail Sales (for October), with a marginal 0.1% m/m increase forecast, but core and the ‘Control Group’ measures are seen accelerating to 0.4% m/m, after lacklustre September readings. Housing Starts, New and Existing Home Sales are also scheduled.

** UK: Ahead of the MPC meeting, Tuesday’s labour data are expected to double down on the weak Sep/Oct data, with HMRC Payrolls seen falling a further 20K, while the Unemployment Rate is forecast to rise to 5.1% from 5.0%, and the much maligned LFS Employment measure to fall –75K. Allied with an expected, though partly base effect driven fall in both headline Average Hously Earnings to 4.4% y/y from 4.8%, and Private Sector Earnings to 3.8% from 4.2%, this should be enough to tip the divided MPC into a rate cut later in the week. Wednesday’s CPI is anticipated to have dipped 0.1 ppt to 3.5%, but both core CPI at 3.4% and Services at 4.5% are seen unchanged, per supporting the MPC’s inflation hawks to vote against a cut. That said the budget measures should bear down sharply on CPI in the new year, on top of the already flagged base effects as this year’s rise in administered prices fall out of the y/y comparison. Friday’s Retail Sales are forecast to post nothing more than a dead cat bounce of 0.3% m/m after the unexpectedly sharp -1.1% in October, and likely still struggling under the anticipation of tax hikes at the Budget, which proved to be less adverse than had been flagged up until 2 weeks before the event, while GfK Consumer Confidence is seen edging up to -18 from -19. Even if rates are cut, the cautious tone on the rate outlook seen in November may be retained, largely because the MPC remains so divided, though it will be interesting to note guidance on revisions to key elements of its forecasts in the wake of the Budget.

** Eurozone: forecasts for the array of PMIs, Ifo Business Climate, ZEW Expectations and array of national confidence surveys, assume only marginal changes vs. November, in no small part reflecting the shortened period between surveys. That said anecdotal evidence on a broad array of German business sectors has been rather downbeat, and disillusion with the grand coalition government is growing, imparting some downside risks, even if most survey readings are already at lowly levels on any historical comparison. The ECB is expected to hold rates at 2.0%, and continue to signal a steady rate outlook, and at the current juncture will probably not want to endorse the market moves to start discounting the next move in rates as being higher.

** China: Today’s run of monthly activity data were rather dire, above all the much weaker than expected 1.3% y/y rise in Retail Sales (vs. Oct 2.9%) and the accelerating falls in Fixed Asset Investment -2.6% y.t.d. (vs. Oct -1.7%) and Property Investment (-15.9% y.t.d. vs. Oct -14.7%), even if Industrial Production held up relatively well at 6.9% y.t.d. For all the verbal commitments to stimulating domestic demand in the new 5-yr plan and other policy announcements, there still seems to be a lack of urgency from the administration, and certainly nothing that would suggest it is looking at a more co-ordinated rather than piecemeal approach.

– There are no S&P 500 companies reporting this week, with worldwide corporate earnings highlights as compiled by Bloomberg News likely to include: Accenture, Cintas, FedEx, Lennar, Micron, Nike, Paychex.