Three major central bank meetings took place last week, with the Bank of England (BoE), Bank of Japan (BoJ) and European Central Bank (ECB) all convening for their final policy gatherings of 2025. Two of the three enacted rate changes, albeit in opposite directions, as the BoE cut its base rate by 25 basis points (bps) (1) while the BoJ raised its own by an equal margin (2). The differing outcomes reflect contrasting inflationary backdrops, with the BoE benefiting from a marked slowdown in UK headline Consumer Price Index (CPI) inflation during November, which fell by 40bps to 3.2% (3). Japan, by contrast, is contending with renewed upward price pressures after decades of disinflation and on occasions outright deflation, and last week’s BoJ hike pushed its policy rate to the highest level since 1995. Adding to the mix, the US reported a surprisingly soft CPI reading of its own, with inflation easing to 2.7% last month (4), some 40bps below expectations, reinforcing the sense that global inflation trends remain uneven as 2026 approaches.

Equity market performance was mixed last week, with regional returns shaped by diverging policy signals and shifting macro sentiment. UK equities were a clear bright spot, as the FTSE 100 and FTSE 250 advanced by 2.6% and 2.0% respectively, with investors taking comfort from easing borrowing conditions despite further signs of deterioration in the domestic labour market. Japanese equities moved sharply in the opposite direction, with the Nikkei 225 falling 2.6% in yen terms, as technology stocks underperformed amid rising rate concerns. In the US, the S&P 500 delivered flat returns overall, as an initially muted reaction to the softer inflation print was offset by a modest rally into the end of the week. On the European mainland, the MSCI Europe ex UK rose 1.2% in euro terms following a steady policy outcome from the European Central Bank. Meanwhile, Chinese equities were largely unchanged, with the Shanghai Composite flat as a series of economic updates offered a mixed and inconclusive view of underlying growth momentum.

(1) Bank of England – December 2025 Monetary Policy Summary & Minutes, 18/12/2025
(2) Bank of Japan – Monetary Policy Meeting Summary, 19/12/2025
(3) ONS – Consumer Price Inflation, November 2025
(4) Bureau of Labor Statistics – Consumer Price Index, November 2025

SJP Approved: 22/12/2025

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