European equities opened slightly lower on Thursday after the Swiss National Bank held its benchmark interest rate at 0% and global investors continued to parse the U.S. Federal Reserve’s latest policy move. The Stoxx 600 slipped around 0.1% in early trading as markets evaluated a widening gap in monetary paths across major economies.
The Swiss central bank said inflation had eased more than expected, allowing policymakers to keep rates unchanged. Despite signs of global resilience – including stronger-than-anticipated third-quarter output – officials warned that U.S. tariffs and elevated trade uncertainty remain a drag on global momentum.
The decision arrived less than 24 hours after the Federal Reserve delivered its third consecutive 25-basis-point rate cut, lowering the federal funds rate to 3.5%–3.75%. Fed Chair Jerome Powell described the policy stance as “well-positioned” to observe incoming data, while noting that inflation pressures continue to be influenced by U.S. trade measures. With only three policy meetings left in Powell’s term, attention is now shifting toward how President Donald Trump’s next appointee may shape future decision-making.
Fed Signals Tougher Road Ahead for Further Cuts
Investors are debating how much further the Fed can ease given persistent inflation, mixed labor-market indicators, and tariff-driven cost pressures. Powell reiterated that progress on inflation has slowed, even as hiring cools and layoff signals have begun to rise.
Economists expect the central bank to approach further cuts cautiously. As previously covered, Fed officials have been increasingly divided over the pace of policy normalization – a dynamic that is likely to continue into early 2026. Analysts highlighted that additional easing may require clearer evidence of weakening activity or sharper disinflation.
The Swiss National Bank’s stance contrasts with ongoing uncertainty in the U.S., as stable inflation conditions have allowed Switzerland to maintain a 0% policy rate without signaling near-term adjustments. The divergence adds another layer to global rate expectations as central banks navigate differing domestic pressures.
Europe Looks to ECB and BOE Decisions Next Week
Eyes now turn to the European Central Bank and the Bank of England, both set to announce policy decisions on Dec. 18. Economists broadly expect the ECB to hold steady, viewing the bloc’s inflation path as largely neutral and the easing cycle as complete for now. Analysts say the Fed’s cut is unlikely to influence the ECB’s near-term stance.
Despite subdued growth, some strategists see signs of improvement ahead. Outlooks for 2026 have brightened as Germany prepares for major infrastructure and defense-focused spending initiatives. Defense stocks have been standout performers this year, with the Stoxx 600 Aerospace & Defense Index up 52% year-to-date. Shares of Rheinmetall gained 1.3% following reports of renewed acquisition interest in rival KNDS.
