16 December 2025: Reeves is accused of stealing Christmas

One of the more obvious headlines in “right-leaning” publications so far this Holiday Season is that the Chancellor of the Exchequer, Rachel Reeves, is being depicted as a Grinch, accused of stealing Christmas after the Budget left households feeling the gloomiest in two years about the outlook for their personal finances.

A closely-watched monthly poll revealed that the mood among consumers has darkened as they run low on cash, turn increasingly to borrowing, and worry about the jobs market.

The consumer sentiment index by financial firm S&P Global, compiled at the start of this month, provides an early snapshot of the impact of last month’s Budget.

Its overall reading was the lowest since April, while sentiment towards the financial outlook over the coming 12 months soured to the gloomiest in two years.

The poll also pointed to ‘a further marked reduction in cash available to spend and a rising need to take on more debt’ as well as wavering confidence in the jobs market.

It suggested that months of speculation hit sentiment and damaged growth in the run-up to the Budget, and there has been little improvement since.

It is well known that the Bank of England’s Monetary Policy Committee is deeply divided about the current and future direction of interest rates. It is almost a foregone conclusion that the result of this week's vote on interest rates will be 5/4, although no one can genuinely say which way the decision will go.

Sarah Breedon, Swati Dhingra, Dave Ramsden and Alan Taylor will vote for a 25bp cut in rates, while Huw Pill, Catherine Mann, Megan Greene and Claire Lombardelli will vote for no change. This will leave Governor Andrew Bailey with the task of casting the deciding vote.

Since the committee’s last meeting in November, when Bailey joined the group that believes that the level of inflation was too high to consider easing monetary policy, very little has changed monetarily, while fiscally, there has been a significant change due to the publication of the Budget.

Bailey will need to “sort the wheat from the chaff” and decide if he wishes to run the risk of markets commenting that fiscal and monetary policy are no longer separate since the Governor is seen as “helping the Government out” as a rate cut, no matter its effect on inflation, would ease voter anxiety about the cost of living.

This is an unusual situation, a week before Christmas, indicative of the precarious state of the economy and interest rates.

The pound lost a little ground yesterday as dealers, forced by market conditions, continued trading well into the period when they usually close their books. Liquidity remains unusually plentiful, and the dollar lost further ground following a tempestuous week.

Sterling fell to a low of 1.3354 and closed at 1.3374.

Federal Reserve Governor Stephen Miran, who only joined the FOMC recently at President Trump’s request, has said he’ll likely remain at the Central Bank after his term expires at the end of January, until a new appointee is confirmed to fill his seat.

Such a move would be permitted under the law that governs the Fed. Miran’s plans to remain on the Board of Governors come as President Donald Trump weighs whom to appoint to replace Fed Chair Jerome Powell, whose term ends in May.

Because Powell has not yet said whether he plans to resign as a Governor when his term as chair ends, Trump is expected to use Miran’s seat to place his nominee for chair, seemingly either Kevin Hassett or Kevin Warsh, on the rate-setting Committee.

Trump has hinted he could make his selection by early next year, and has made clear he’ll only pick someone who supports his calls for substantial interest-rate cuts. This is his third attempt to delay the decision; first saying he would decide by Thanksgiving, then by Christmas, and then this latest delay.

“Until somebody else is confirmed for my seat, I anticipate I would continue,” Miran said during an appearance last evening on CNBC.

Miran was appointed to the Fed Board by Trump in September. He is taking an unpaid leave of absence as a top White House economic adviser. Since joining the Central Bank, he has dissented against three quarter per cent interest-rate cuts in favour of larger half-point reductions.

Economic conditions do not presently merit a fifty-point cut. This is generally reserved for when a cut is considered vital in response to a significant event. For example, if the AI Bubble were to burst or there was an unusual lack of liquidity, where markets would be at risk of a free fall.

His ability to continue serving on the Fed’s board after his term expires means Trump isn’t necessarily under time pressure to name his chair or see that person confirmed by the Senate, since Miran has generally advocated for a rate policy that aligns with the president’s desires.

Still, Miran told CNBC that whether he continues to dissent will depend on how officials implement policy going forward.

He said, “As the Fed lowers rates and reduces the restraining effect of its policy on the economy, the imperative to dissent for an extra-big cut becomes similarly lessened.”

In contrast, Federal Reserve Bank of New York President John Williams has said monetary policy is well-positioned for next year following last week’s interest-rate reduction, amid increased risks to employment and somewhat lessened inflation risk.

Meanwhile, Federal Reserve Bank of Boston President Susan Collins said a changing inflation outlook tilted her toward supporting last week’s central bank interest rate cut.“I supported last week’s decision to lower the target range for the federal funds rate by 25 basis points, although for me, it was a close call,” Collins said in a statement from her office. “Available information suggested the balance of risks had shifted a bit, and scenarios with a notable further rise in inflation seem somewhat less likely.”

The dollar index fell to a low of 98.14 yesterday, again challenging its short-term support level. It managed to rally to close at 98.28 as traders adopted the simplest view between Central Banks like the Fed and the BoE, who are on a path towards lower interest rates, and those like the ECB, who believe that their next rate move will be a hike.

The European Central Bank's new forecasts will probably feature a more optimistic outlook for economic growth, according to its President, Christine Lagarde.

The Eurozone has been more resilient than feared to the US tariff onslaught, Ms Lagarde told reporters yesterday. She highlighted that the European Union hadn't retaliated to those measures, while the Euro hadn't depreciated, and the labour market remained robust.

"In the last projection exercises, we have upgraded our projections," she said today. "I suspect that we might do that again this month."

Euro-area bonds fell, lifting French 10-year yields to a nine-month high above 3.6% before they quickly pared the move. Money markets now see a 40% chance of a quarter-point interest-rate hike next year, up from 30% last week.

Policymakers have grown increasingly convinced that borrowing costs can be left unchanged for the foreseeable future, thanks in part to the economy's resilience. Gross domestic product grew 0.3pc in the third quarter, more than initially estimated.

Lithuanian central-bank chief Gediminas Simkus joined Lagarde in saying that he doesn't see a need for further cuts, a shift from earlier comments that signal increasing conviction inflation isn't going to drop much below the ECB's goal.

ECB board and Governing Council Member Isabel Schnabel told reporters last week that she believes the next move in interest rates will be a hike, though she expects it not to be necessary for some time. This “prophecy” has gained significant traction, with investors and economists “jumping on the bandwagon”.

"With a track record of close to 2% inflation and a medium-term projection at 2%, I would say again that we are in a good place," Ms Lagarde said, describing the economy as being "quite close to potential".

Lagarde also responded to a call by French President Emmanuel Macron for a new approach to monetary policy in the Eurozone that focuses not just on inflation, but also on economic expansion and employment. This is in contrast to the US, while the ECB's primary mandate is to safeguard price stability.

"It's a good debate to have, and it's interesting to consider a possible treaty change," Ms Lagarde said.

Flash PMI indices and the German ZEW index will be published later today, with markets expecting more of the same: Spain and Portugal leading the way, and France and Germany bringing up the rear.

The Euro has continued to have a late-year flourish. It climbed to a high of 1.1768 yesterday and closed at 1.1751. This is its highest level since late September. With hawkish comments becoming more regular, a correction is unlikely any time soon.

Have a great day!