Week of 23. Dec: US, UK & EZ Economic Updates & Outlooks

Despite the shortened trading week due to Christmas, key news has emerged from some of the world’s leading economies as traders and investors keep an eye out for a potential Santa Rally—although the chances of one may be slim. 

Here’s what you need to know on the week of 23 December and ahead of the new year:

Has EZ Inflation Neared the ECB’s 2% Target?

Today, Monday 23 December, in an interview with Financial Times (FT), European Central Bank (ECB) President Christine Lagarde revealed that inflation in the eurozone is nearing the central bank’s target range of 2%.

According to Lagarde, the ECB is “getting very close to that stage when [they] can declare that we have sustainably brought inflation to our medium-term 2%.” However, she also adopted a dovish tone, noting that certain sectors, particularly the services sector, should be closely monitored, as it has experienced a price surge that is double the ECB's target. The ECB will also keep an eye on corporate earnings and wages. (Source: Yahoo Finance)

What Else Does the ECB Need to Keep in Mind?

In addition to the considerations above, the ECB may want to monitor Europe’s energy taxes. EU industries face electricity prices that are 2-3 times higher than those in the US, with taxes accounting for 23% of the retail electricity price. While tax reforms are currently stalled, the EU plans to propose a strategy for more affordable energy prices next year. 

The European Union is working on measures to support struggling industries, but energy-intensive sectors like automotive and steel face significant challenges, including high energy costs and limited access to credit. 

Leonhard Birnbaum, president of Eurelectric, has urged governments to address these high energy taxes, which are eroding competitiveness. He stressed the importance of removing extraneous costs from energy prices, particularly taxes on electricity, which are disproportionately higher than those on gasoline. 

It will be interesting to see how the vital energy sector performs this year and how it affects the ECB’s monetary policies. (Source: Yahoo Finance)

What Is Expected from the ECB in 2025?

While its actual monetary policy is still being determined, and ECB officials indicate a desire to gradually ease policy, the central bank is widely expected to cut deposit rates four times next year.

When Will the ECB Meet in 2025?

As of 23 December, the scheduled ECB monetary policy meetings for 2025 are as follows:

• 16 January 2025

• 6 March 2025

• 10 April 2025

• 5 June 2025

• 17 July 2025

• 11 September 2025

• 23 October 2025

• 11 December 2025

Will the US Debt Ceiling Carry to 2025?

Among the economic challenges of both 2023 and 2024, the US debt ceiling stood out as a key issue. While it was dodged this year, the outlook for 2025 may be less promising. 

The temporary suspension of the debt ceiling ends on 1 January 2025, reactivating the cap. Although the Treasury can temporarily delay default by moving money between government accounts, the duration of this delay is uncertain. The exact date when the debt ceiling will be hit is unpredictable, but it could come as early as mid-June 2025. Meanwhile, Donald Trump has called the debt ceiling a "trap" set by Democrats and opposes any standoff. With Republicans controlling the White House, Senate, and House, Speaker Mike Johnson plans to use the reconciliation process to raise the debt ceiling.

As such, it will be interesting to see how the world’s biggest economy tackles this issue in 2025 and how Trump’s administration will intervene.

US Economic Outlook

In addition to the above, traders should pay attention to Goldman Sachs’ (GS) latest updates on the US economy. 

Despite facing economic challenges, GS expects the US to outperform other developed markets, projecting 2.6% real Gross Domestic Product (GDP) growth in 2025 and a decline in unemployment to 4.0%. 

Core inflation is forecasted to ease to 2.4% by December, driven by lower shelter costs and reduced wage pressures. 

However, US tariff policies, along with ongoing uncertainties in the Middle East and Ukraine, could significantly affect global economies, particularly in Europe and China. The potential impact of widespread tariffs remains a key factor to watch.

UK GDP: Is the UK Economy Stagnating?

Today marked a significant moment for the UK economy with the release of the GDP data, highlighting concerns over stagnating growth. Despite Prime Minister Keir Starmer's pledge to drive economic growth, the UK saw no expansion between July and September. 

Additionally, in a surprising downgrade, figures from the Office for National Statistics (ONS) revealed that third-quarter growth was revised down to zero, lower than the initial estimate of 0.1% from last month. 

This adjustment points to the UK potentially facing two consecutive quarters of flat economic activity. The downturn follows a decline in business and consumer confidence, fueled by negative rhetoric from the new government and warnings of tax hikes in the upcoming autumn budget.

Gloomy Economic Projections for 2025

The Confederation of British Industry (CBI) has warned that the UK is "headed for the worst of all worlds" in 2025, as private sector companies anticipate reducing output and hiring while raising prices in the first quarter of the year.

A major factor behind this pessimistic outlook is Chancellor Rachel Reeves' decision to increase employers' national insurance contributions (NIC), which is expected to generate around £25bn annually. Alpesh Paleja, the CBI's interim deputy chief economist, stated that to restore confidence and encourage investment in 2025, the government should consider long-needed reforms, such as adjusting the apprenticeship levy, enhancing occupational health incentives to support workforce well-being, and revising business rates.

Still, only time will reveal how this county’s economy will perform in the new year.

Conclusion 

As the new year approaches, economic uncertainties across major global markets, including the US, UK, and Eurozone, point to a complex global landscape. How these issues unfold in 2025 will have significant implications for traders, investors, and global markets.