While the Fed eased its monetary policy on 10 December for the third consecutive FOMC meeting, without making any guarantees about future action, the Bank of England (BoE), the ECB and the Bank of Japan (BoJ) are holding their respective meetings this week. The BoE is expected to cut its key interest rate, the ECB to keep it steady, and the BoJ to raise it. These decisions come amid resilient growth performance despite shocks, which should lead central banks to remain cautious, whether in terms of easing (a residual cut expected for the BoE and none for the ECB) or raising key rates (which should remain a gradual process in Japan). This climate of monetary policy neutrality could be accompanied by greater pressure on long-term sovereign rates than during the period of monetary easing.
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Since the pandemic, household consumption has evolved very differently between the Eurozone and the United States. In Europe, weak growth in real gross disposable income, moderating wealth effects, and rising real interest rates have dampened demand. In the United States, however, consumption has exceeded what fundamentals would suggest, buoyed by the housing wealth effect and fiscal stimulus. This divergence is likely to narrow, however, with the Eurozone gradually correcting its underperformance, albeit unevenly across countries, while the United States is expected to see an end to its outperformance, without falling into underperformance.
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Growth in emerging economies remained solid in 2025, driven by exports and supportive financial conditions. Global trade was stimulated by export front loading ahead of US tariff increases, as well as by the reconfiguration of trade flows and the boom in the tech sector. In 2026, growth in emerging economies is expected to remain resilient but become more moderate. Supportive factors are likely to fade and global trade is expected to slow down. Fiscal and monetary policies will continue to support domestic demand but will be more constrained than in 2025. Monetary easing will be more measured, and fiscal room for manoeuvre will be reduced by the need to curb the increase in public debt ratios.
September's US employment figures reported the highest payroll growth since April (+119k). However, this fairly positive reading could prove short-lived due to the impact of the government shutdown. For the Fed, these developments add to the uncertainty surrounding its December meeting. We are still expecting a 25bp rate cut, which is now a close call.
Growth in emerging economies has remained solid since the beginning of the year, thanks in particular to buoyant exports and easing financial conditions. Up until the summer, the front-loading of purchases in anticipation of tariff increases in the United States stimulated trade. In addition, global trade flows have been reorganised. In 2026, fiscal and monetary policies will continue to support growth, but will be more constrained. Monetary easing will be less pronounced than in 2025, if only because of the uneven pace of disinflation across countries. Fiscal policy will be constrained by the need to curb the growth of public debt ratios
After a solid start to the year, Chinese economic growth has gradually slowed. Thanks to a rapid reorientation, exports have weathered the US tariff shock well. They are the main driver of economic activity, while domestic demand remains stubbornly fragile. The authorities have launched an “anti-involution” campaign, but adjusting demand policy in order to boost domestic investment and consumption, at a time when exports may begin to run out of steam, is also becoming urgent. Despite the deterioration in public finances in recent years, the central government and local governments still have some room for manoeuvre to act.
India's economic growth surprised on the upside between April and June 2025 (+7.8% y/y). However, activity is less dynamic than it appears, and the downside risks to growth are high. Household consumption remains sluggish. To support domestic demand and offset the impact of the rise in US tariffs on activity, the government has announced a reduction in VAT rates, even though its fiscal room for manoeuvre is limited. The central bank is likely to remain cautious in its monetary easing, as downward pressure on the rupee remains strong. In the medium term, the growth outlook could deteriorate if the United States maintains tariffs on Indian exports that are much higher than those on products from other Asian countries.
Indonesia is less exposed to the consequences of the US tariff increases than other ASEAN countries, but risks are tilted to the downside. Companies have begun to suspend their investments. Against this backdrop, the authorities have stepped up measures to support the economy. The central bank has cut its key interest rates more than in other Asian countries, and the new Finance Minister has announced an increase in social spending. Public debt remains under control, but it is financed mainly on bond markets, particularly by foreign investors who are concerned about fiscal slippage under the Prabowo administration. However, although this government is less conservative than the previous one and the situation calls for greater vigilance, the risks to debt sustainability are contained.
Turkish economic growth is slowing down. Excluding changes in inventories, final demand contracted in Q2 2025, after slowing significantly in Q1. In doing so, it rebalanced with less consumption and more investment. The contribution of foreign trade has become negative, but for the time being, the current account deficit remains contained thanks to lower energy bills and tourism revenues. Persistent inflation remains the main obstacle to growth, not only because of its detrimental effects on purchasing power and external competitiveness (through the appreciation of the real exchange rate), but also because of the constraints it imposes on monetary policy in a context of temporary but recurring financial instability
Poland is expected to join the group of the world's 20 largest economies by 2025. Its GDP in nominal terms is expected to exceed USD 1 trillion this year. The country could also see its GDP per capita (in volume and PPP terms) surpass that of Japan, according to IMF forecasts. The Polish economy continues to outperform in the region. In 2025 and 2026, investment and consumption will be the key drivers of growth. Inflation has returned to the official target range since July, thus providing greater flexibility for monetary policy. On the other hand, fiscal room for manoeuvre is more limited, even if consolidation will be gradual.
Electoral uncertainty weighed heavily on Romania's economic activity last year. In 2025 and 2026, real GDP growth is expected to improve only slightly. Inflation has accelerated over the past two months and will continue to rise in the short term, while it is ticking lower in all Central European countries. However, the monetary authorities are not expected to change gear and will likely maintain a status quo in the short term. As for fiscal policy, the scope for supporting the economy is significantly reduced due to significant consolidation measures.
As a result of monetary tightening, Brazil's economic growth has been losing momentum over the last two quarters. Nevertheless, the slowdown in domestic demand is facilitating the disinflationary process, which is further bolstered by decreasing food and oil prices, along with the appreciation of the real. Despite highly restrictive monetary conditions, labour and credit markets continue to exhibit areas of resilience within the economy. The impact of trade tensions with the United States are currently limited, as lost exports find alternative destinations. Diplomatic efforts, combined with Brazil's geostrategic position, point to a possible easing of tensions ahead
Mexican economic growth held up well in the first half of 2025. The slowdown is expected to be more pronounced in the coming quarters: export momentum is likely to diminish due to the implementation of US tariffs, while domestic demand is expected to remain sluggish. Inflation is expected to decelerate moderately, and the cycle of monetary policy easing is likely to continue in 2026. Public finances represent a structural weakness in the Mexican economy. Consistent support for the oil company Pemex, fiscal spending rigidity and overly optimistic projections used by the government when setting its annual budget have resulted in the failure of the consolidation policies proposed by successive administrations. Consequently, the fiscal deficit has been widening since 2019
Since the spring, the macroeconomic and financial situation has deteriorated significantly. The successful stabilisation of 2024 was ultimately short-lived. The economy is expected to have formally entered recession in the third quarter. The current account is once again in deficit despite very restrictive fiscal policy, and despite massive support from the IMF since April, official foreign exchange reserves remain low compared with upcoming external debt repayments in 2026. Since September, the government has benefited from the support of the US Treasury, and President Milei's party emerged victorious from the mid-term elections, which has reassured investors
