The “finale” of monetary policy at the end of the year: the European Central Bank debuted on the same day. Is only one expected to cut interest rates?

The Zhitong Finance App learned that investors are closely watching the arrival of the last batch of interest rate decisions in 2025. On Thursday, Europe's four major central banks will focus on announcing their monetary policies and macroeconomic outlook.

The European Central Bank, the Bank of England, the Bank of Sweden, and the Bank of Norway will all hold policy meetings this week. The market generally expects that only one of the four major central banks will adjust the benchmark interest rate.

The following is an inventory of market expectations:

European Central Bank

Since recent economic data did not signal policy adjustments, the market expects the ECB to keep the benchmark interest rate unchanged. The central bank will announce the interest rate decision at 9:15 Beijing time.

Investors, however, are more concerned about signs of growing disagreement within the management committee. Some members (such as Isabel Schnabel) publicly agreed with the market and believed that the next interest rate adjustment would be interest rate hikes; other members believed that there is still room for interest rate cuts.

Christian Kopf, head of the bond portfolio at German asset management company Union Investment, said in an interview: “In the short term, I don't expect the Eurozone to adjust interest rates. If there are changes in 2026, interest rate hikes will most likely be initiated at the end of 2026 or the beginning of 2027.”

Furthermore, with the release of a new round of internal economic forecasting reports, the ECB may raise the Eurozone's economic growth outlook.

Norges Bank

The market generally anticipates that the Bank of Norway will announce that it will maintain the benchmark interest rate at 4% at 17:00 Beijing time. Economists predict that the next rate cut may be postponed until the summer of 2026.

Morten Lund, Nordic's chief economist at J.P. Morgan Chase, pointed out that the Bank of Norway's policy guidelines on Thursday “should refute the rising market's expectations of interest rate cuts in March.” He said that the current market's expectations for interest rate cuts in March next year are close to 50%.

In contrast, J.P. Morgan predicts that the Norges Bank will probably cut interest rates in June next year, although it is unlikely that the Norges Bank will clearly specify a specific time.

Lund added: “Forward-looking guidelines are expected to continue to be vague, such as 'if economic development is broadly in line with current forecasts, policy interest rates will be gradually lowered over the next year'. We also expect the central bank governor to reaffirm that the level of inflation is still high and once again emphasize that 'we are in no hurry to cut interest rate'.”

Riksbank

The Riksbank will announce its interest rate decision at 18:00 Beijing time, and the market expects to keep its key policy interest rate unchanged at 1.75%.

Franziska Fischer of UBS Investment Bank said that the Swedish central bank's easing cycle has come to an end, and it is likely that interest rates will not be adjusted in the next few quarters.

She pointed out, “The Riksbank cut interest rates by 25 basis points in September and chose to stay on hold in November. At the same time, it sent a signal that the benchmark interest rate may remain stable 'for some time to come'.”

Fischer added that UBS believes that changes in economic fundamentals since November are insufficient to support adjustments in interest rate prospects.

Bank of England

The Bank of England is the only institution that is expected to cut interest rates among the four major central banks this time. The market expects that among the nine members of the central bank's monetary policy committee, a weak majority will support cutting interest rates by 25 basis points, thereby lowering the benchmark interest rate to 3.75%.

Expectations of interest rate cuts are heating up due to a sharp drop in November inflation data — the inflation rate fell to 3.2% in the same month, compounded by the UK's recent weak economic data (including sluggish growth data and rising unemployment) to jointly push the policy to ferment expectations.

Although the inflation rate is still higher than the central bank's 2% target, the downward trend has opened up room for policy adjustments. In order to stimulate economic growth and boost the scale of consumption and credit, the Bank of England has the operating conditions to cut interest rates.

Furthermore, the fall budget released by the British government last month is thought to have the effect of curbing inflation. It includes various measures such as lowering energy bills and freezing fuel taxes and train fares.