Central banks have been the focus of the market’s attention for the last few weeks, and by the time Shares is published the Federal Reserve will already have met to decide on interest rate cuts.

The consensus is for another 0.25% cut this week to 4.5%, but bets on the extent to which US rates will fall have been pared back sharply in recent months and expectations for Fed policy in 2025 are much less certain.

This week includes a raft of US economic data, including November industrial production and retail sales as well as December’s manufacturing and services PMI (purchasing managers’ index) readings, which the Fed will no doubt consider as it prepares its deliberations.

The Bank of England meets on Thursday, and recent economic data has been less than robust with GDP (gross domestic product) shrinking by 0.1% in October after a similar contraction in September.

That doesn’t mean a cut is on the cards this week, however, as inflation is forecast to rise again next year due to the increase in business costs unveiled in the Budget.

One area of the economy which has been performing well is the housing market, but a rise in mortgage rates following the Budget took the wind out of its sails according to the Nationwide index which showed new seller asking prices dropped by 1.7% between November and December.

While analysts remain positive on house prices for next year, we would note a large number of buyers are coming to the end of their fixed-rate deals and will have to refinance at rates starting with a four rather than a two or a three, while the end of the stamp duty holiday next April could also stymie prices. 

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