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China's central bank is cutting interest rates on its structural monetary policy tools by 0.25 percentage points, a targeted move designed to support the economy as it moves into 2026.

A Closer Look at the New Lending Rates

Deputy Governor Zou Lan announced in a Beijing briefing on Thursday that the one-year rate for various relending facilities will fall from 1.5% to 1.25%. These instruments are designed to encourage commercial banks to extend credit to specific sectors of the economy.

The People's Bank of China (PBOC) will also roll out two other key initiatives:

• A new, dedicated relending program for private companies.

• Increased lending quotas for technology innovation loans.

Policy Context and Future Rate Path

These adjustments signal a commitment to targeted easing as China's economy navigates weak demand and persistent imbalances. The move follows a year of limited action. In 2025, the PBOC only reduced its main policy interest rate once by 10 basis points, far less than the 40 to 60 basis points of easing many analysts had anticipated.

Looking ahead, Zou noted that improved interest margins at commercial banks have created room for a potential reduction in the main policy rate, although he did not provide a specific timeline.

Additional Liquidity and Open Market Operations

To further bolster credit availability, the PBOC will merge and expand existing facilities, providing an extra 500 billion yuan for lending to small businesses and the agricultural sector.

Zou added that the central bank also intends to gradually increase its trading of government bonds through open market operations. This strategy aims to ensure the financial system maintains ample liquidity.

According to Zou, the monetary authority will release detailed documents outlining the implementation of these new policies shortly.

The World Bank has upgraded Nigeria's economic forecast, projecting the nation's economy will expand by 4.4% in both 2026 and 2027. This would mark the fastest growth rate Nigeria has seen in over a decade, according to the bank's latest Global Economic Prospects report.

Key Drivers of the Upgraded Forecast

The optimistic outlook builds on momentum expected in 2025, when growth is anticipated to reach 4.2%. This increase is primarily fueled by a robust expansion in the services sector, particularly in finance and information and communication technology.

Other contributing factors include a modest recovery in agriculture and Nigeria's recent emergence as a net exporter of refined petroleum products. The World Bank expects this trend to continue, with a modest acceleration in non-oil industrial activities further supporting the 4.4% growth projected for the following years.

How Reforms and Oil Output Support Growth

The World Bank highlights that ongoing economic reforms are crucial to this positive trajectory. Improvements to the tax system, combined with a prudent monetary policy, are expected to support economic activity, boost investor confidence, and help bring down inflation.

Furthermore, higher oil output is anticipated to strengthen Nigeria's fiscal position and external balance. This increased production is forecast to offset the impact of lower international oil prices, thereby shoring up government revenues.

Regional Outlook for Sub-Saharan Africa

Looking at the broader region, the World Bank projects that growth in Sub-Saharan Africa will firm up to 4.3% in 2026. This recovery is supported by ongoing reforms in some of the continent's largest economies, solid domestic investment, and easing inflation.

Many economies in the region are pursuing fiscal consolidation in response to reduced official development assistance, elevated government debt, and higher debt-servicing costs.

Persistent Risks Cloud the Horizon

Despite the improved outlook, the report warns that significant challenges remain. The projected growth in per capita income across Sub-Saharan Africa is still insufficient to make substantial progress in reducing extreme poverty or creating enough jobs for the population.

The risks to the forecast remain tilted to the downside. Key threats to regional growth prospects include:

• Weaker-than-expected external demand

• Lower international commodity prices

• Increased political instability and conflict

• Further declines in donor support, which could heighten vulnerability to shocks like public health crises and natural disasters

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Source: Reuters

Source: CNBC

Chinese banks issued the smallest amount of new loans last year since 2018, with credit expansion continuing to slow in December. This downturn highlights sluggish demand from both businesses and consumers, posing a significant drag on the nation's economic growth.

The slowdown in loan growth is not a recent development. It began in early 2023 and persisted throughout the year, signaling deep-seated weakness in the economy. Tepid consumer spending and low business investment have pushed China into a deflationary environment, which in turn reduces the incentive to borrow by eroding corporate profits and household wages.

Drivers Behind the Credit Contraction

Several factors are contributing to the decline in credit expansion.

Initially, a surge in government bond sales during the first half of last year provided a temporary boost to overall credit growth. However, the impact of this stimulus has since diminished, partly because a higher base of comparison from 2024 has come into effect, pulling down the expansion rate.

Another headwind is the government's campaign to reduce "hidden" or off-balance-sheet debt, an effort that began in late 2024. As part of this initiative, Beijing has instructed local authorities to issue new bonds to replace these hidden liabilities, some of which were held as bank loans.

The Central Bank's Patient Approach

Despite the deteriorating credit data, officials are not expected to intervene aggressively in the short term. The People's Bank of China (PBOC) has signaled a tolerance for the slowdown, framing it as part of a patient transition toward new economic growth drivers like advanced technology.

With the central bank taking a secondary role in managing an economy held back by weak demand and structural imbalances, fiscal stimulus is now expected to provide the primary support.

Modest Easing Unlikely to Reverse Trend

Looking ahead, economists surveyed by Bloomberg anticipate the PBOC will implement modest easing measures in 2026, including policy interest rate cuts totaling 20 basis points.

However, such moves are unlikely to reverse the decline in credit expansion on their own. Without a fundamental turnaround in the demand for financing from companies and individuals, the credit slowdown is poised to continue.

The UK economy expanded more than expected in November, providing a dose of positive news and easing concerns about a potential slump at the end of 2025.

Data from the Office for National Statistics (ONS) released on Thursday showed that Gross Domestic Product (GDP) rose by 0.3%. This figure marks a solid rebound from the 0.1% contraction seen in the previous month and comfortably outpaced the 0.1% growth that economists had predicted.

The British pound, which had seen a slight dip against the US dollar, recovered its footing after the data was published, trading largely unchanged at $1.3442.

Manufacturing Rebound Drives Economic Expansion

A significant recovery in the manufacturing sector was the primary driver behind the surprise growth. Industrial production was responsible for half of the entire GDP increase, with the manufacturing sub-sector growing by a robust 2.1%. The services sector also contributed, expanding by 0.3%.

The ONS highlighted a strong comeback in production at Jaguar Land Rover as a key factor. The car manufacturer's operations had been disrupted by a cyberattack earlier in the autumn.

"Data for the latest month show that this industry has now largely recovered," noted Liz McKeown, ONS Director of Economic Statistics, referencing the hit to car production.

Despite the strong monthly performance, the broader trend remains modest. On a three-month basis, economic output saw a narrow increase of just 0.1%. November was only the second month in the latter half of the year to record economic expansion.

Economic Outlook and Upcoming Fiscal Headwinds

The stronger-than-expected November figures may help calm worries that the economy was deteriorating, especially after recent signs of mounting job losses and cautious consumer spending.

Economists anticipate that economic activity could pick up in early 2026. This outlook is based on the expectation that several temporary drags—including the Jaguar Land Rover cyberattack, budget uncertainty, and strikes—will begin to fade.

However, the economy faces new fiscal pressures. Chancellor Rachel Reeves announced £26 billion ($35 billion) in tax increases in her budget on November 26. While the implementation of these measures is staggered, the new tax burden will primarily fall on households. This contrasts with the previous year's fiscal event, where businesses shouldered the bulk of the tax hikes.