Brazil’s central bank raised its rate by 100bps to 12.25%, as expected by the markets, and restored its forward guidance, anticipating two further 100bp hikes at the next two meetings, reaching 14.25%, but leaving the bank’s outlook for a terminal rate data dependent.

As we approach the end of the year, at a time when inflation in Europe is close to target but growth continues to point to prolonged stagnation, we take stock of what the ECB have done so far and what we think the way forward should be.

Since the COVID crisis in 2020, many countries have experienced economic cycles moving in similar directions. They faced similar lockdowns, supply chain problems, fiscal easing, monetary easing, and energy crises. In 2023 and early 2024, we saw these effects continue as monetary policy tightened and inflation began to normalise.

But following four years of synchronised economic fortunes, we saw a big divergence in 2024: the continued economic strength of the US. Despite tighter policy rates, the consumers had deep enough pockets to keep spending, at least in aggregate. In many other parts of the world—including Europe—the economic prospects became weaker quite quickly in 2024.