Economic Analysis

The Federal Reserve Open Market Committee (FOMC) meeting for December saw the central bank cut interest rates by 25bps, with the target range for the Fed funds rate lowered to 3.50-3.75%. This was the third rate cut from the central bank in 2025, totalling 75bps. The decision to cut rates by 25bps was in line with market expectations. However, the voting breakdown showed some differing views within the FOMC. Three members dissented, the highest in six years.

This Budget is set against an uncertain economic backdrop so far this year. GDP growth was robust in the early part of the year but has since moderated. The Chancellor had committed to not raising taxes materially further following last year’s hikes to national insurance (NI) on employer contributions, which among other measures raised £40bn. While the tax rises are largely to fill the hole in the fiscal rules, there are also net spending increases in the budget

Manufacturing PMI edged slightly lower to 50.9 in October. The services PMI jumped to 56.7 in October, a ten-month high. Core retail sales rose by 0.8% in Q3. Housing commencements 12 month running dropped further to 23.5k in October. House price annual inflation inched up to +7.6% in September. HICP inflation rose to 2.8% in October, amid increases in education and food prices. Goods exports up by 60.8% YTD in September, led by a sharp increase in pharma exports (+66.2%) and 12 month rolling Exchequer surplus widened to €10.6bn in October.

The November meeting of the Bank of England's Monetary Policy Committee (MPC) saw the central bank maintain the Bank Rate at 4.00%. This was the second consecutive meeting that the BoE Kept rates unchanged and was in line with market expectations. It also brings an end to its recent practice of lowering rates at meetings that correspond to the publication of its quarterly Monetary Policy Report (MPR). 

The October meeting of the ECB's Governing council saw the central bank leave interest rates on hold. This was the third successive meeting that the central bank left its official retes unaltered. The deposit and refi rates were maintained at 2.00% and 2.15%, respectively. 

As we reach the halfway mark of 2025, the Irish residential property market continues to be defined by a shortfall in supply. The CSO completions data, which is the official measure of new supply indicate, a disappointing performance over the last year from the residential construction perspective.

The global economy entered 2025 in good shape, with indicators pointing to stronger growth in the Eurozone and UK, and continued robust, yet moderating growth in the US. However, the uncertainty created by the imposition of US trade tariffs, followed by partial 90-day delays, has created volatility in financial markets and concern in the real economy.