Take Two: Fed and Canada cut interest rates; ECB and Bank of Japan remain on hold

What do you need to know?

The Federal Reserve (Fed) lowered interest rates by 25 basis points (bp), marking its second cut this year. The widely anticipated cut brought borrowing costs down to 3.75% - 4.0% and came in response to a slowdown in job growth and sticky inflation. However, policymakers were divided on the decision, with one voting for a 50bp reduction, and one for no change. Fed Chair Jerome Powell said a further rate cut in December is “not a foregone conclusion”. Elsewhere, the Bank of Canada brought rates down by 25bp to 2.25%, while the Bank of Japan (BoJ) held steady at 0.5%. 

Around the world

The European Central Bank (ECB) left interest rates unchanged at 2.0% for the third consecutive meeting, in line with market expectations. The decision was driven by continued economic growth in the Eurozone, a robust labour market and solid private sector balance sheets, though the outlook is still uncertain, the ECB said. Separately, the Eurozone economy grew by 0.2% in the third quarter (Q3), faster than expected and up from Q2’s 0.1% pace, an official flash estimate showed. Eurozone annual inflation eased to 2.1% in October from 2.2% in September, though core inflation – excluding food and energy - remained unchanged at 2.4%.

Figure in focus: 1.5°C

Humanity has failed to limit global warming to the 1.5°C target agreed in Paris in 2015, United Nations (UN) Secretary General António Guterres warned in an interview. It is “inevitable” the target will be exceeded, with “devastating consequences”, he said – including passing catastrophic ‘tipping points’ in the Amazon, the Arctic and oceans. Speaking ahead of next week’s UN climate change conference COP30, Guterres urged countries to “change course” and significantly decrease their carbon emissions, to bring temperatures down to the 1.5°C target by the end of the century.

Words of wisdom

Agentic commerce: A potential new era of shopping where autonomous artificial intelligence (AI) can act on consumers’ behalf, making decisions and completing transactions. Agentic commerce could drive retail sales of up to $1trn in the US alone, with global projections of between $3trn and $5trn, according to a new report from consultancy McKinsey. In the coming years, agentic AI could anticipate consumer needs, search for products, compare options, negotiate prices and instigate purchases, transforming the customer experience and presenting both opportunities and risks for today’s commerce ecosystem, it said. 

What’s coming up?

Central banks are in focus again this week; the Reserve Bank of Australia meets to decide on interest rates on Tuesday, while the BoJ publishes the minutes of its latest monetary policy meeting on Wednesday. On Thursday, the Bank of England convenes to set interest rates. In terms of economic data, the US, Eurozone, UK and Canada publish their final manufacturing Purchasing Managers’ Indices (PMI) on Monday, followed by the composite PMIs – covering both manufacturing and services – on Wednesday and Japan publishes its PMI on Thursday. On Friday, China issues its trade balance figures and Canada reports its unemployment rate. 

Read more insights and views at the AXA IM Investment Institute