United States – One more cut while waiting for the new Chair
This Wednesday the Fed is set to cut rates by 25 basis points. With terminal rates priced around 3% and the announcement of a new Chair still pending, markets will closely watch the dot plot and projections to assess how split the FOMC is and whether it validates the current dovish pricing. Labour market soft data point to a slight improvement but inflation and NFP prints are still missing, complicating the policy outlook as additional fiscal support in 2026 is expected to provide a further boost the economy.
Japan – BoJ set to move
19th December is shaping up as a pivotal moment for Japan, with the Bank of Japan (BoJ) now very likely to hike rates. With Takaichi’s fiscal stimulus in the pipeline, inflation holding at 3%, the 1y1y rate at 1.25% and roughly 23 basis points already priced for this meeting, pressure is mounting The yen’s sharp depreciation is increasingly weighing on the economy, and long-end JGBs have sold off on fears the central bank will deliver a one-and-done hike without addressing deeper macro imbalances. The key question is whether the BoJ is ready to move beyond a symbolic hike and signal a credible path forward.
Algebris Investments’ Global Credit Team
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