Core Viewpoint - Stephen Miran, a Federal Reserve governor appointed by President Trump, warns that the U.S. economy faces recession risks unless the Fed continues to cut interest rates next year, highlighting a deep division within the Fed regarding interest rate policy [1][2]. Group 1: Miran's Position on Interest Rates - Miran emphasizes the need for further interest rate cuts, suggesting that the rising unemployment rate exceeds expectations and should prompt a shift towards a more dovish policy stance [1][2]. - He has advocated for larger rate cuts of 50 basis points since joining the Fed in September, although he acknowledges that the necessity for such cuts has diminished after a cumulative reduction of 75 basis points [2][3]. - Miran argues that maintaining a tight policy could lead to unnecessary unemployment and that the underlying inflation rate is close to the Fed's target when excluding certain distortions [2][3]. Group 2: Divergence Among Fed Officials - Other Fed officials, such as Cleveland Fed President Beth Hammack, express a more cautious stance, suggesting that the current monetary policy is favorable and that they can pause rate cuts to assess the impact of previous reductions [5][6]. - New York Fed President John Williams and Boston Fed President Susan Collins also indicate a preference for a more measured approach, with Collins noting concerns about persistent inflation [5][6]. - The recent FOMC meeting revealed significant internal dissent, with three votes against the decision to cut rates, reflecting differing priorities among officials regarding labor market conditions and inflation control [6].

Core Insights - The US dollar's global reserve share decreased to 56.32% in Q2 2025, primarily due to exchange-rate effects rather than central bank portfolio changes [1][3] - Central banks maintained their dollar allocations despite significant currency fluctuations, with the dollar's reserve share only marginally declining to 57.67% when adjusted for constant exchange rates [1][3] - The DXY index experienced a decline of over 10% in the first half of 2025, marking its largest drop since 1973 [2] Currency Movements - The US dollar fell 7.9% against the euro and 9.6% against the Swiss franc in Q2 2025, contributing to the perceived decrease in its reserve share [3] - The euro's reserve share appeared to rise to 21.13%, but this increase was also driven by currency valuations rather than actual changes in central bank holdings [4] Implications for Digital Assets - The analysis suggests muted macro signals for Bitcoin and other digital assets, as central banks did not diversify away from the dollar despite its depreciation [5] - Dedollarization trends, often cited as potential drivers for institutional crypto adoption, may be misleading without proper context, as shown by the COFER data [6] Investor Insights - The IMF's study provides a clearer understanding of monetary policy during volatile markets, helping investors distinguish between genuine policy shifts and temporary valuation changes [7]

Germany’s economy will gradually recover next year and gain momentum in 2027, helped by higher public outlays on defense and infrastructure, the Bundesbank said https://t.co/LdKeW3wu5h ...

Core Viewpoint - The Bank of Japan's interest rate hike has led to a depreciation of the Japanese yen and a corresponding increase in Bitcoin's value, reflecting market expectations and the ongoing shift in Japan's monetary policy [1][3]. Group 1: Bank of Japan's Policy Changes - The Bank of Japan raised its short-term policy rate by 25 basis points to 0.75%, marking the highest level in approximately three decades [1]. - The BOJ acknowledged that inflation has remained above its 2% target due to rising import costs and stronger domestic price dynamics, yet emphasized that real interest rates remain negative, indicating continued accommodative monetary conditions [2]. Group 2: Market Reactions - Following the rate decision, the Japanese yen fell to 156.03 per U.S. dollar from 155.67, while Bitcoin rose from $86,000 to $87,500 before stabilizing around $87,000 [3]. - The market's reaction was in line with expectations, as the rate hike had been anticipated, and speculators had maintained long positions in the yen, which mitigated any sharp buying response [3]. Group 3: Carry Trade Dynamics - Japan's historically low interest rates have made the yen a favored funding currency for carry trades, allowing investors to borrow cheaply in yen to invest in higher-yielding assets globally [5]. - Concerns that the rate hike could strengthen the yen and lead to an unwinding of carry trades were deemed exaggerated, as Japanese rates would still be significantly lower than U.S. rates, preventing a mass unwinding of these trades [6].

Core Viewpoint - The European Central Bank (ECB) is prepared to launch a digital euro following the completion of technical and preparatory work, with the project currently under review by the European Council and the European Parliament [1][2]. Group 1: Digital Euro Overview - The proposed digital euro aims to serve as a public digital currency with legal tender status, enhancing financial stability, monetary sovereignty, privacy, and inclusion while improving Europe's payment infrastructure [3]. - As a retail central bank digital currency (CBDC), the digital euro will ensure the availability of central bank money to the public, providing a modern and cost-effective payment method with a high level of privacy in digital transactions [4]. Group 2: Legislative Process and Privacy - The ECB emphasizes that while technical preparations are complete, a clear legal basis is necessary for the launch, making the legislative process a critical step forward [5]. - The final decision to issue the digital euro will be made by the ECB's Governing Council, with privacy features integrated into its design, ensuring that the Eurosystem does not access users' personal data while regulated intermediaries handle compliance with EU law [6].

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.

Core Viewpoint - The European Central Bank (ECB) has maintained interest rates at 2% for the fourth consecutive meeting, reflecting stable inflation around the target level and resilience in the euro zone against global economic shocks [1] Economic Outlook - The ECB's decision was accompanied by new forecasts indicating stronger economic growth and an expectation for inflation to return to 2% by 2028, after being below this level in the next two years [1]

Core Viewpoint - The Bank of England decided to cut interest rates by 25 basis points to 3.75% with a narrow majority vote, indicating a shift in monetary policy amid lower-than-expected inflation data [1] Group 1: Interest Rate Decision - The decision to lower the interest rate was supported by five members of the committee, while four members preferred to maintain the current rate [1] - Analysts had anticipated that more members would support the rate cut following the release of UK inflation data that fell below expectations [1] Group 2: Market Reaction - Following the announcement of the interest rate decision, the yield on UK 10-year government bonds increased by 4 basis points, rising from 4.449% to 4.494% [1]

FRANKFURT, Germany (AP) — The European Central Bank left interest rates unchanged Thursday for the fourth meeting in a row as the economy in the 20 countries that use the euro increasingly looks strong enough to get by without the stimulus of lower borrowing costs for businesses and consumers. Bank President Christine Lagarde said that while the economy had remained “resilient,” there was too much uncertainty over trade and international conflicts to give any hints about future moves. “We reconfirmed th ...

Core Viewpoint - The People's Bank of China (PBOC) is set to issue the 10th batch of central bank bills in Hong Kong, enhancing the availability of high-credit-rated RMB financial products and improving the RMB yield curve in Hong Kong [1] Group 1: Issuance Details - The 10th batch of central bank bills will be issued on December 22, 2025, through the Hong Kong Monetary Authority's Central Maturity Unit (CMU) bond bidding platform [1] - The bills will have a maturity of 6 months (182 days), with a total issuance amount of RMB 40 billion [1] - The face value of each bill is RMB 100, and they will be issued using a Dutch auction method, with the bidding focused on interest rates [1] Group 2: Key Dates - The interest start date for the bills is December 24, 2025, and the maturity date is June 24, 2026, with the maturity date being adjusted for public holidays [1]