Economic Analysis

27 February

2 - 6 March

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Historic FX & Interest Rates for 2025

The manu. PMI remained at 52.2 in Jan. amid a sustained, albeit slightly weaker rise in output and new orders. However, business expectations for the year ahead improved markedly Traditional industrial production stagnated in Q4, meaning it was 3.5% lower in YoY terms

The first ECB Governing Council policy setting meeting of 2026 saw the central bank leave interest rates on hold.
The deposit and refi rates were maintained at 2.00% and 2.15%, respectively. This outcome was very much in line with market expectations. Its marks the fifth consecutive meeting that the central bank has left its official rates unaltered. The last time the ECB eased policy was last June when it cut rates by 25bps. In total, the central bank cut rates by 200bps during its easing cycle.

The first policy setting meeting of the year of the Bank of England’s Monetary Policy Committee (MPC), saw the central bank leave the Bank Rate unchanged today, at 3.75%.
This outcome was very much in line with market expectations.
The most recent rate cut from the BoE occurred at its previous meeting in December, when it lowered the Bank Rate by 25bps. This represented the fourth 25bps rate cut from the BoE last year. So far in its current easing cycle, which began in August 2024, the BoE has lowered rates by 150bps in total.

The Irish residential property market remains defined by tight supply as 2025 draws to a close. However, over the course of the year, there have been some encouraging signs in the supply dynamics, albeit the outlook remains challenging. 

The first Federal Reserve Open Market Committee (FOMC) meeting of 2026 saw the central bank leave interest rates unchanged. The target range for the Fed funds rate was maintained at 3.50–3.75%. The decision to leave rates unaltered was very much in line with market expectations. There were two dovish dissenters at the January FOMC (Miran and Waller), who voted for a 25bps rate cut. The most recent rate change from the Fed occurred at its previous meeting in December, when it cut by 25bps. This represented the third 25bps rate cut of the year. So far, in its current easing cycle, which began in September 2024, the Fed has cut rates by a total of 175%.

Global economy has proven to be robust over the past year despite ongoing geopolitical uncertainty, but risks still tilted to the downside. US growth increasingly imbalanced towards AI investment, with labour market weakening. Fed and Bank of England on hold at first meetings of the year, but set for further cuts while the ECB sits on the sidelines. Bank of Japan plotting further modest hikes. Dollar set for further modest weakening. Geopolitics, Fed independence and conditions in the labour market remain to the fore in 2026. Further modest upside for the euro, while sterling could remain on the defensive amid political uncertainty, and Bank of England policy easing.

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.