Global Economy Briefing: December 18, 2025

Key Points

• U.S. inflation cooled (CPI 2.7% y/y; core 2.6%) as claims stayed contained and factories mixed.

• Europe held policy steady; the UK cut to 3.75%. Mexico also cut, with retail still growing.

• Asia’s price pulse stayed mild; Japan’s core CPI was 3.0% y/y; Korea’s PPI inched up.

United States

The headline was disinflation without a growth scare. CPI slowed to 2.7% y/y; core was 2.6%. Initial claims were 224k; continuing claims 1.897m.

Philadelphia Fed stayed negative (−10.2) but new orders turned positive (5.0) and prices paid eased to 43.6.

Kansas City’s composite slipped to 1; manufacturing to −3. Gas storage drew 167 bcf. Bills cheapened a touch (4- and 8-week at ~3.58%).

TIC showed net outflows in October (overall −$37.3b; long-term +$17.5b; foreign T-bond buying −$61.2b). The Fed’s balance sheet rose to $6.557t; reserves were $2.934t.

Read-through: softer prices, stable labor, no funding stress.

Europe and UK

The ECB held (refi 2.15%; deposit 2.00%), signaling patience. France’s business survey jumped to 102. Euro construction output rose 0.88% m/m.

The Bank of England cut to 3.75% (vote 5-0-4 to cut/hold/hike) and issued its inflation letter. UK risk is still growth, not price. Russia’s reserves were steady near $741b.

Latin America and Africa

Mexico’s retail advanced 0.4% m/m and 3.4% y/y. Banxico cut to 7.00%, leaning on falling core and a resilient consumer.

Argentina posted a $2.498b trade surplus and unemployment at 6.6%. South Africa’s PPI was flat m/m and 2.9% y/y—benign for margins.

Asia-Pacific

Japan’s national CPI was 2.9% y/y; core 3.0% y/y; monthly prints were modest. Korea’s PPI rose to 1.9% y/y and 0.3% m/m.

Australia’s inflation expectations ticked up to 4.7%, but reserve assets rose to A$113.1b, adding a buffer. China quiet on the day; regional tone stayed price-calm, demand-steady.

Canada

Average weekly earnings slowed to 2.18% y/y, keeping disinflation on track.

Why this matters

Lower U.S. inflation and calmer European policy reduce global rate volatility. A UK cut and a Mexico cut show central banks easing where credibility is solid.

Asia’s mild price pulse and rising buffers keep FX stable. For expats and international operators, that means fewer surprise spikes in borrowing costs and imports.

What to watch next

U.S. factory sentiment versus holiday spending. UK growth after the cut. Mexico’s peso under a lower rate.

Japan’s core staying near 3.0% with services firm. Energy balances into winter after today’s large gas draw.

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