Market Information Thursday 5 December 2024

Bank of England Governor Andrew Bailey anticipates four interest rate cuts in 2025 due to the faster-than-expected fall in UK inflation. The BoE’s forecast relies on market expectations for rates, with the OECD cautioning the UK might not be able to lower rates as much as other economies due to its unique growth and inflation challenges. Bailey acknowledged several potential economic scenarios, with the central forecast suggesting gradual rate reductions.

Bundesbank President Joachim Nagel advocates easing Germany’s debt brake to boost investment in defense and infrastructure, aiming to tackle stagnant economic growth. He suggests that reform and fiscal flexibility could enhance resilience amid challenges like potential US tariffs and weak manufacturing competitiveness. As Germany’s stable unemployment leans on low-wage jobs, revising the debt brake is a key election issue.

The EU is close to finalizing a historic free trade agreement with the Mercosur countries, but faces opposition from the Netherlands, France, and Poland due to agricultural concerns. The Mercosur agreement aims to reduce tariffs and other trade barriers, yet member states are worried about competition from cheaper imports that may not meet EU standards. To bypass potential national vetoes, the European Commission could separate the trade section for approval by a qualified majority, a strategy previously used for the Ceta agreement.

The 6M Euribor decreased with 5 basis points to 2.63% compared to previous business day. The 10Y Swap is unchanged at 2.09% compared to previous business day.

In the attachment, today’s market data on money and capital market rates as well as other rates are presented.