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Daily Economic Update
11.12.2025
US: Fed reduces interest rates by 25 bps as expected, continues to see only one cut each in 2026 and 2027. The FOMC reduced the Fed fund target rate by 25 bps to the 3.50-3.75% range in a 9-3 vote, with dissenters Kansas City Fed President Schmid and Chicago Fed President Goolsbee opting for no-change and Governor Miran pitching for a larger 50 bps cut. The committee also authorized the fresh start of T-bill purchases to maintain an ample level of reserves. The FOMC statement noted “in considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data,” with Chair Powell saying, the current stance was “within a range of plausible estimates of neutral” rates. He also re-iterated several times that this leaves them “well positioned” to determine the extent and timing of additional adjustments to the policy rate, in an apparent reference to maintaining a pause on rate moves in the near term. The widely followed dot-plot showed one more rate cut in each of 2026 and 2027, unchanged from September. Members also upgraded their GDP growth outlook in Q426 to 2.3% y/y (from 1.8% previously) and to 1.7% in Q425 (from 1.6%), while partly shifting growth from this year to the next due to the government shutdown during the current quarter. Annual PCE and core PCE inflation were seen slowing to 2.4% and 2.5% in Q426 from 2.6% each previously, with an unchanged unemployment rate of 4.4% by Q426, slightly down from 4.5% in Q4 this year. Powell highlighted that Fed’s employment and inflation goals were “a bit in tension,” given downside risks to employment and “somewhat elevated” inflation, which were drawing different views amongst Fed officials. He underscored that inflation overshooting the Fed’s 2% target is mainly due to tariffs, while he continued to see tariffs driving "one-time price increases” and expected goods inflation to peak by Q126 or so, barring no major new tariff announcements. He also mentioned that recent job growth, although positive for now, will likely be revised downward to show net job losses. He also cautioned that the soon to be released official labor market data for October and November (specifically the household survey, which produces the unemployment rate) will be very much distorted. For next year, he emphasized a likelihood of “solid growth” given AI-related business investments, “resilient” consumer spending, and “supportive” fiscal policies. We note that despite only two FOMC members voting to keep rates on hold, the dot-plot showed that a total of six members (voting plus non-voting) preferred a no-change in interest rates in this meeting. Moreover, out of the total 19, seven saw rates at current levels or higher by end-next year. For now, the futures market continues to signal around two-third probability of two interest rate cuts in 2026.
GCC: Regional central banks cut key interest rates by 25 bps mimicking the Federal Reserve move. GCC central banks moved in lockstep with the Fed last night, cutting their benchmark rates by 25 bps. The Saudi Central Bank reduced its repo and reverse repo rates to 4.25% and 3.75%, respectively. The UAE central bank lowered the base rate applicable to its overnight deposit facility by 25 bps to 3.65%. The Central Bank of Qatar reduced its main policy rates by 25 bps, bringing the deposit rate to 3.85%, the repo rate to 4.10%, and the lending rate to 4.35%. The central banks of Bahrain and Oman likewise announced a 25-bps cut in their respective benchmarks, the overnight deposit rate to 4.25% for Bahrain and the repurchase rate to 4.25% for Oman. Meanwhile, the Central Bank of Kuwait (CBK) followed with a 25-bps cut to its key discount rate to 3.5% from 3.75%, for only the third time since the Fed’s current monetary policy easing cycle commenced in September 2024. This brings cumulative CBK cuts to 75 bps compared to 175 bps for the US Fed and other GCC central banks. In its communique, the CBK explained that it aimed to “keep pace with developments in the local economy, stimulate economic activity…and maintain the financial stability of banking and financial institutions”.
Egypt: Inflation slows for a second consecutive month, putting a December interest rate cut on the table. Egypt’s annual urban inflation eased to 12.3% y/y in November, inching down from 12.5% in October, marking the second consecutive month of deceleration, according to CAPMAS. On a monthly basis, inflation slowed sharply to 0.3% m/m, compared to 1.8% m/m in October, suggesting a notable easing in underlying price pressures despite the fuel price hike implemented in mid-October. Transportation prices rose by 9.8% m/m (nearly 6% weight in the CPI basket) in November, reflecting the delayed impact of higher fuel prices. However, this acceleration was more than offset by a sharp decline in prices of the heavyweight food and beverage component (36% of the CPI basket), which fell by 2.6% m/m. That drop was driven mainly by a 15% m/m decline in vegetable prices, underscoring the high volatility in fresh food items. A similar pattern was observed earlier this year when falling fruit prices cushioned the inflationary impact of fuel hikes in April. This month’s data highlights how volatile food prices continue to dominate short-term inflation dynamics, occasionally masking pressures stemming from administered price adjustments. The core inflation published by the Central Bank of Egypt that excludes volatile and regulated items increased to 12.5% y/y, from 12.1% in October, though still within the accepted levels and remaining below 13%. With the MPC scheduled to meet on 25 December, November’s softer inflation reading strengthens the case for a rate cut especially with the real policy rate still hovering high around 10%. We expect a cut of at least 100 bps that could deepen to 200bps should broader global and FX market conditions stabilize over the next two weeks especially after the Fed’s latest 25bps cut that could maintain the capital flow stable in emerging markets like Egypt. Going forward, a measured easing path would support private-sector activity and foreign direct investments while preserving macro and external stability should foreign portfolio investment inflows or ‘hot money’ start to reverse in 2026 in response to Fed policy or global economic developments.
UAE: Credit growth maintains strong momentum on robust private sector lending. Domestic credit growth accelerated for the sixth consecutive month, reaching 8.4% y/y in October, up from 8.2% in September. The expansion was driven primarily by the private sector, which accounts for nearly three-quarters of total domestic credit, up 9.6% y/y, supported by the sustained strength in personal lending (+16.0% versus 15.7% in September) and credit to businesses and the industrial sector (+6.1% y/y versus 5.7%). In contrast, public sector credit growth eased slightly to 4.9% y/y from 5.1% in September. On the funding side, residents’ deposits growth moderated to 14.3% y/y from 15.4 as the rise in government deposit decelerated to 2.3% y/y from 6.9% previously, despite a notable increase in private sector deposits (+18%). Consequently, the loan-to-deposit ratio edged down to 69.2% in October from around 71% at end-2024. On a ytd basis, domestic credit growth reached 10.1%, compared to 7.7% in the same period last year. Residents’ deposits also posted robust growth of 12.7%. Credit growth is expected to remain solid but moderate slightly in 2026, in line with a projected easing in non-oil GDP growth from 4.8% in 2025 to 4.5%.
Saudi Arabia: Industrial activity maintains strong expansion in October. Industrial production maintained a rapid pace of expansion in October, up 8.9% y/y though easing slightly from the series high of 9.3% in September. Overall production was lifted by increased oil activity, which rose by a series high of 10.8% y/y (from 10% in September) on the back of the continued unwinding of previous OPEC voluntary oil production cuts. Meanwhile, growth in non-oil activities moderated to a still solid 4.4% y/y from a 16-month high of 7.6% in September, with manufacturing (ex-refining) output up by 4.1% y/y (from 6.8%) led by chemical products (8.1%), paper products (5.6%) and non-metallic products (4.4%). Electric and water supply/waste management activities also saw strong growth (5.1% and 8.5%, respectively). We expect industrial production to continue to grow, supported by sustained investment in manufacturing, increased urbanization, and the phasing out of oil production cuts which is projected to extend well into 2026.
China: IMF lifts its GDP growth forecast for 2025 and 2026, urges China to accelerate structural reforms. The IMF called on China to make “brave choices,” in the words of Managing Director Kristalina Georgieva, to shift toward a consumption-led economy and reduce reliance on debt-driven exports, warning that “China is simply too big to generate much more growth from exports.” In its Article IV review, the Fund upgraded China’s growth forecast for 2025 to 5.0% (from 4.8%) and for 2026 to 4.5% (from 4.2%), citing stronger policy stimulus and lower-than-expected tariffs on exports. Despite resilient growth, the IMF highlighted persistent imbalances, including weak domestic demand, deflationary pressures, and a rising current account surplus driven by real exchange rate depreciation. It urged Beijing to adopt a comprehensive policy package—expansionary fiscal and monetary measures, reforms to reduce high household savings, and scaling back inefficient investment and industrial policy support—to accelerate the transition outlined in the 15th Five-Year Plan. It estimates ending the housing downturn—where real estate accounts for about 70% of household wealth—will cost roughly 5% of GDP over three years, while reforms to the social welfare system could lift consumption by up to 3% of GDP. Additional priorities include cleaning up balance sheets in government and property sectors, advancing market-oriented reforms, and boosting social spending to unlock consumption potential.