Global news wrap: Rate cut expectations, US data fog, AI bubble warning
- Major central banks are expected to end 2025 with rate cuts amid trade-related uncertainties, and weak growth impulses
- US' delayed data release due to the 43-day-long government shutdown has created an information gap for investors and policymakers
Every month, Mint’s Plain Facts provides an update on key global data to help you thread together the biggest developments worth noticing. The accompanying analysis and charts explain how each story is creating ripples on the global stage, where it is headed in the coming weeks, and whether it could have an impact on India.
Policy paths
The current year marked monetary policy easing by key central banks amid tariff-related disruptions and expectations of weak growth momentum. This will likely continue in December, with the US, India and the UK expected to cut interest rates further to support growth.
In the US, the Federal Reserve is expected to hold meetings on 9-10 December against an extraordinary challenge: the government shutdown has delayed several data releases. The decision may be taken on the basis of partial, private and survey-based indicators.
In India, a record-low inflation rate of 0.25% in October, combined with expectations of a slowdown in growth, has opened the door for a rate cut next month.
In the UK, the Bank of England, having already cut rates five times since mid-2024, is likely to deliver another cut in December as inflation shows signs of cooling.
The European Central Bank (ECB), after eight cuts since 2024, is expected to keep policy steady, while the Bank of Japan (BoJ) is expected to hike rates even as the economy contracted in July-September.
Data fog
The US government shutdown has ended, but its effects are still being felt. Investors and policymakers around the world are facing a significant information gap, as the shutdown has delayed several important data sets, creating uncertainty about both the current situation and the near-term economic outlook.
Key reports, including October’s inflation and employment figures, were cancelled, leaving both policymakers and markets without a full picture of labour markets, price pressures, and overall economic activity.
Analysts warn that this data “fog" makes it difficult to assess the true momentum of the economy, with some private surveys showing steady consumer spending, while others indicate rising layoffs.
The delayed jobs report for September showed modest gains, but with revisions expected, the underlying health of the labour market remains unclear. The US Fed may also have to deliver the monetary policy decision amid the data fog.
While the consensus is that the US economy is not in crisis, lack of timely official data has introduced heightened uncertainty and is keeping investors nervous.
Japan’s slump
Japan’s economy contracted 0.44% quarter-on-quarter in July-September, making the first such decline in six quarters as US tariffs took a toll on the country’s exports.
Japan's exports contracted 1.2% q-o-q during the quarter, mainly due to auto exporters reversing front-loading of shipments that had happened in the previous quarter ahead of the US tariffs. Japan’s auto sector is facing 15% US tariffs.
A slowdown in housing investment, due to stricter energy-efficiency rules, also weighed on economic momentum. Private consumption weakened further to 0.1%, down from Q2’s 0.4%.
On the other hand, capital expenditure increased 1%, exceeding forecasts and highlighting pockets of resilience. Even as Japan entered economic contraction, the pace was less severe than market forecasts of 0.6% and economists see the decline as temporary.
The government’s plan to roll out a stimulus package exceeding 17 trillion yen ($110 billion) to support households that are facing rising living costs is expected to boost consumption and support the economy in early 2026.
COP out?
Against the backdrop of climate change effects being felt around the world, the 30th Conference of the Parties (COP) concluded last week in Brazil, with lack of ambition on phasing out fossil fuels drawing criticism.
The summit was held amid scepticism over its failure to address key climate-related issues. The final text did not include explicit agreement to phase out oil, gas, and coal again, but just transition away from fossil fuels.
Once again, the summit was marked by geopolitical divisions and the absence of the largest historical emitter, the US, was seen as weakening the efforts towards the global cause.
As a result, the focus shifted towards China, the second-largest emitter, which made its presence felt by sending the second-largest delegation, after host country Brazil, with 789 delegates, according to an analysis by CarbonBrief. However, it was smaller than last year’s 969.
India, on the other hand, kept a low profile, sending just 87 delegates, lower than last year’s 111. The absence of top leaders from China, India, and Russia also signalled more fractures in the efforts to build a global consensus on addressing climate change.
AI anxiety
The year 2025 has been marked by AI-driven companies and their hold over the US market. A small group of companies, notably Nvidia, Microsoft, Alphabet and Meta, among others, are driving gains in the benchmark S&P 500.
Out of these, stocks of Nvidia and Alphabet have done particularly well this year. These four companies alone make up over 20% of S&P 500. Such concentration has created risks, with many analysts warning of a potential ‘AI bubble’.
Gita Gopinath, former first deputy managing director of the International Monetary Fund (IMF), noted that the current AI exuberance resembled past tech bubbles when high valuations ran ahead of more concrete indicators like profit and productivity gains.
The concern was echoed by renowned investor Michael Burry, who had correctly predicted the 2008 financial crisis. He noted that the pace of investments in the AI ecosystem was dangerous and risked creating excess capacity beyond sustainable end-user demand.
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