Core Viewpoint - The Indian government has retained its retail inflation target at 4%, within a comfort band of 2%-6%, for the next five years, which is part of the inflation-targeting framework adopted in 2016 [8]. Inflation Targeting Framework - The Reserve Bank of India (RBI) is tasked with maintaining consumer price inflation within the set band, with its Monetary Policy Committee comprising three central bank officials and three government-appointed members [8]. - The framework was last reviewed in 2021, and the RBI has signaled support for the existing framework, stating it has helped anchor inflation expectations [7][8]. Current Inflation Situation - As of February, consumer price inflation in India is low at 2.75%, but it is expected to rise above 4% in the upcoming financial year due to global oil price surges and supply disruptions from the Iran war [2][8]. - The current inflation targeting framework allows the RBI flexibility to manage supply-side shocks while maintaining its target [4][5]. Economic Advisory and Adjustments - The Indian government's chief economic advisor, V. Anantha Nageswaran, has suggested a review of the framework due to frequent inflation spikes driven by food prices, advocating for a focus on core inflation [6][8]. - India has revamped its consumer price index to reduce the share of food, which is expected to limit volatility in inflation measurements [6][8]. Future Outlook - The RBI's rate-setting panel is scheduled to make its next decision on April 8, following a steady rate hold in February [5][8]. - The ongoing West Asia crisis presents downside risks to growth and upside risks to inflation, which the RBI must navigate [5][8].

Economic Growth Outlook - India's economy is projected to maintain strong growth momentum, with GDP expected to expand by around 8.1% in Q3FY26, supported by strong domestic demand and steady economic activity across sectors [1][10] - The first advance estimates indicate that India's GDP is projected to grow at 7.4% in FY26, primarily driven by domestic demand [5][10] Consumption Trends - High-frequency economic indicators suggest resilient economic activity during Q3FY26, with strong rural consumption supported by positive signals from both farm and non-farm activities [2][10] - Urban consumption has shown steady improvement, aided by fiscal stimulus and increased spending since the last festive season [2][10] GDP Base Year Revision - India has updated its GDP base year from 2011-12 to 2022-23, with new series scheduled for release on February 27, 2026, aimed at better reflecting the current structure of the economy [7][11] - The revision is expected to incorporate additional data and revisions, with previous quarterly GDP figures for the first and second quarters likely to change [6][10] Consumer Price Index Update - The base year for the Consumer Price Index (CPI) has been updated to 2024, which will provide a more accurate measure of inflation based on current consumption patterns [8][11] - The Reserve Bank of India (RBI) is examining the revision of the inflation targeting range following the CPI base year update, which will be considered in the next policy [8][11]

Summary of the European Central Bank Update / Briefing December 18, 2025 Industry Overview - **Industry**: European Central Bank (ECB) and Eurozone Economic Outlook Key Points and Arguments 1. **Interest Rates Decision**: The ECB decided to keep the three key interest rates unchanged, indicating a cautious approach to monetary policy amid economic uncertainties [2][3][13] 2. **Inflation Projections**: - Headline inflation is projected to average 2.1% in 2025, 1.9% in 2026, and stabilize at 2% in 2028. - Inflation excluding energy and food is expected to average 2.4% in 2025 and gradually decline to 2% by 2028 [2][9] 3. **Economic Growth Outlook**: - Economic growth has been revised upward to 1.4% for 2025 and 2027, and 1.2% for 2026, driven by domestic demand and investment [3][5] - The labor market remains robust with unemployment at 6.4% in October, close to historical lows [4] 4. **Domestic Demand as Growth Engine**: Real incomes are expected to rise, and a gradual decrease in the saving rate will support consumption. Business investment and government spending on infrastructure are also anticipated to bolster growth [5][12] 5. **Geopolitical Context**: The ECB emphasizes the need to strengthen the euro area economy in light of geopolitical tensions, particularly the war in Ukraine, which poses risks to economic stability [5][10] 6. **Inflation Dynamics**: - Annual inflation remained stable at 2.1% in November, with energy prices down 0.5% year-over-year and food price inflation at 2.4% [6] - Services inflation has increased, contributing to overall inflation, with compensation per employee rising at an annual rate of 4% [7][29] 7. **Risks to Economic Outlook**: - Potential risks include geopolitical tensions, global trade challenges, and volatility in financial markets, which could disrupt growth and inflation [10][11] - A stronger euro could further lower inflation, while fragmented supply chains might increase import prices [10][11] 8. **Monetary Policy Approach**: The ECB will continue a data-dependent approach to monetary policy, assessing inflation outlooks and economic data on a meeting-by-meeting basis [3][13] 9. **Digital Euro Initiative**: The ECB is progressing with the Digital Euro project, aiming to enhance financial stability in the euro area [34][35] 10. **Future Projections**: The ECB plans to review economic and inflation projections in February, considering the impact of AI and other factors on growth [17][18] Other Important Content - **Labor Market Trends**: The job vacancy rate is at its lowest since the pandemic, indicating a cooling labor demand [4] - **Investment Trends**: The contribution of exports, particularly from the chemical industry, has surprised on the upside, indicating resilience in certain sectors [18] - **Financial Stability Concerns**: The ECB acknowledges risks to financial stability due to geopolitical uncertainties and potential market volatility [12][10] - **Legal Considerations**: Discussions around the ECB presidency succession and the implications of appointing a sitting member of the Executive Board were addressed, emphasizing the need for clarity on legal frameworks [33][25] This summary encapsulates the key insights from the ECB's briefing, highlighting the current economic landscape, inflation dynamics, and the central bank's strategic approach to monetary policy amidst ongoing uncertainties.

Federal Reserve Actions - The recent interest rate cuts by the Federal Reserve are viewed as insufficient and delayed, with suggestions that they should have started in June [1] - Concerns are raised that the Fed's approach may continue to hinder economic growth into 2026, impacting jobs and mortgages [2] - The Fed's reliance on outdated economic models is criticized, suggesting that these models are detrimental to the economy [3][5] Interest Rates and Economic Trust - The current high mortgage rates are attributed to the 10-year yield remaining above 4%, indicating a lack of trust in the Fed's monetary policy [4][6] - A shift in the Fed's monetary policy model is proposed to lower interest rates across the yield curve, which could subsequently reduce mortgage rates [7] Federal Reserve Leadership - The search for a new chairman of the Federal Reserve is underway, with candidates including former Fed Governor Kevin Worsh and Kevin Hasset, who is seen as a front-runner [8][9] - The current board's reluctance to cut rates is highlighted, with a significant portion of the Federal Open Market Committee (FOMC) opposing recent cuts [10][11] Economic Growth and Policy - The Fed's current models are seen as conflicting with the goal of fostering a growth-oriented economy, as they impose limits on economic speed [11][12] - President Trump's focus on economic growth and investment is contrasted with the Fed's inflation-targeting approach, which is deemed ineffective [5][14] Trade and Tariffs - The Supreme Court's upcoming decision on the use of emergency tariffs is anticipated, with potential implications for revenue and trade practices [15][18] - The administration is exploring alternative constitutional statutes to replace any lost tariff revenue, indicating a proactive approach to trade policy [16][20] Small Business Lending - Weakness in small business lending is identified as a critical issue, with the Fed's current models failing to support job growth in this sector [20][21] - The impact of AI on job replacement is acknowledged, alongside efforts to promote trade schools to address workforce needs [22]

Economic Activity - Economic activity is expanding at a moderate pace, although job gains have slowed and the unemployment rate has increased through September [1] - Recent indicators align with the trend of slowing job gains and rising unemployment [1] Inflation and Employment - Inflation has increased since earlier in the year and remains elevated [1] - The Committee aims for maximum employment and a long-term inflation rate of 2 percent, but uncertainty about the economic outlook is high [2] - There has been a rise in downside risks to employment in recent months [2] Federal Funds Rate Adjustment - The Committee has decided to lower the target range for the federal funds rate by 0.25 percentage points to a range of 3.5% to 3.75% [3] - Future adjustments to the federal funds rate will depend on incoming data, evolving outlook, and balance of risks [3] - The Committee is committed to supporting maximum employment and returning inflation to the 2 percent target [3]

Group 1 - The Treasury market is currently hovering below a key level of 4.25%, but remains above the significant 4% level, indicating market stability despite inflation concerns [1][2] - Year-over-year core PCE inflation is reported at 2.9%, which is above the pre-COVID levels and indicates persistent inflationary pressures, well above the Federal Reserve's 2% target [2][3] - The Federal Reserve may reconsider aggressive easing strategies due to the persistent inflation and stable labor market, as evidenced by the tame claims data of 218,000 [3] Group 2 - The Treasury yields have increased, with a rise of seven basis points on the week for the 10-year and five basis points for the two-year, reflecting market reactions to recent economic data [4] - The dollar index has appreciated by approximately 1.6% since the Federal Reserve's easing on the 17th, indicating a strengthening dollar amidst the current economic environment [4]

Core Viewpoint - Brazil's central bank has entered a "new stage" of monetary policy, opting to keep interest rates unchanged at 15% while assessing if this level is sufficient to achieve the 3% inflation target [1][2]. Monetary Policy - The rate-setting committee acknowledges that the current economic scenario aligns with its monetary policy stance, indicating a gradual moderation in growth [2]. - The central bank halted an aggressive tightening cycle in July, which had increased the Selic rate by 450 basis points since September 2024 [3]. - Policymakers remain vigilant, particularly monitoring services inflation, and have noted a more favorable inflation dynamic compared to earlier this year, although concerns about deanchored inflation expectations persist [3]. Inflation Data - Brazil's 12-month inflation rate reached 5.13% in August, while the central bank's target is set at 3%, with a permissible range of plus or minus 1.5 percentage points [4]. Criticism of Monetary Policy - Finance Minister Fernando Haddad criticized the central bank's high borrowing costs, stating he sees "no justification" for maintaining elevated interest rates and believes there is room for rates to decrease [5].

Monetary Policy Strategy - The Federal Open Market Committee (FOMC) is reviewing its monetary policy framework, focusing on price stability and the implications of inflation experiences over the past five years [4][5][6] - Participants reaffirmed their commitment to a 2 percent longer-run inflation objective, emphasizing the importance of anchored inflation expectations for achieving price stability and maximum employment [6][7] - Discussions included the advantages and disadvantages of flexible average inflation targeting versus flexible inflation targeting, with a consensus leaning towards flexible inflation targeting as a more robust strategy [8] Financial Market Developments - Significant market volatility was observed, with longer-maturity Treasury yields rising and the dollar depreciating by over 2 percent against major currencies [9][10] - Market participants lowered GDP forecasts and raised inflation expectations, increasing the probability of a recession within the next six months [9][10] - Liquidity in foreign exchange markets deteriorated but remained consistent with historical volatility measures [11] Economic Situation - Consumer price inflation was reported at 2.3 percent in March, with core PCE inflation at 2.6 percent, both lower than the previous year [22] - The unemployment rate stabilized at 4.2 percent, with solid labor market conditions and average monthly payroll gains consistent with previous years [23] - Real GDP showed a slight decline in the first quarter, attributed to measurement issues and a surge in imports ahead of anticipated tariff hikes [24] Financial Stability - The U.S. financial system's vulnerabilities were characterized as notable, with asset valuation pressures and high housing valuations amid economic uncertainty [37] - Credit quality remained stable for large firms and most mortgage categories, but concerns were noted in the commercial real estate sector [35] - The staff projected a weaker economic outlook due to trade policies, with expectations of slower productivity growth and a widening output gap [41] Committee Policy Actions - The FOMC decided to maintain the federal funds rate target range at 4¼ to 4½ percent, citing solid economic activity and elevated inflation [59][64] - The Committee expressed a commitment to supporting maximum employment and returning inflation to the 2 percent objective, while remaining cautious due to increased uncertainty [63][64] - Future adjustments to the federal funds rate will be based on incoming data and the evolving economic outlook [60][64]