European Market Reaction to Fed and SNB Policy Decisions (December 11, 2025)

This analysis is based on the CNBC report [1] published on December 11, 2025. On December 11, European markets reacted to two central bank decisions: the Fed’s December 10 rate cut and the SNB’s same-day rate hold. The Fed reduced rates by 25 bps (third cut of the year) to 3.5%-3.75% but signaled only one additional 2026 rate cut via its dot plot, which disappointed investors who may have priced in more cuts [1][4]. This led to an initial 0.1% dip in the pan-European Stoxx 600 at 8:27 a.m. London time [1].

Concurrently, the SNB held its key rate at 0% due to Swiss November inflation falling to 0% [2]. The SNB noted global growth resilience but cited U.S. trade policy uncertainty as a headwind [1]. While the SNB’s decision added short-term uncertainty, the Fed’s news remained the primary driver of initial market sentiment, given the U.S. central bank’s global influence [1]. By the close, major European indices recovered: STOXX 50E +0.11%, FTSE 100 +0.16%, DAX +0.27% [0], likely due to investor reassessment of the Fed’s decision and focus on positive European economic signals (e.g., German defense sector growth) [1].

1. Fed policy dominates global market sentiment
   : The European market’s initial dip and subsequent recovery were primarily driven by the Fed’s less dovish outlook, overshadowing the SNB’s rate hold and deflation warning [1].
2. Investor reassessment mitigates negative sentiment
   : The late-day recovery suggests investors adjusted their expectations following the initial disappointment, highlighting market resilience to mixed policy signals [0][1].
3. Swiss deflation risk requires monitoring
   : The SNB’s decision to hold rates amid 0% inflation signals potential deflationary pressures, which could lead to negative rates and disrupt Swiss and European financial markets [1][2].

• Swiss deflation and negative rates
  : The SNB’s signal of possible negative rates to combat deflation could distort Swiss and European bond markets and bank profitability [1][2].
• Fed policy uncertainty
  : Upcoming U.S. inflation/labor data and the 2026 Fed chair transition could shift rate outlooks, leading to global market volatility [1][4].
• U.S. trade headwinds
  : European growth remains vulnerable to U.S. trade policy, despite modest 2026 growth expectations [1].

• European growth pickup
  : Modest expected 2026 European economic growth could support market stability if U.S. trade uncertainties resolve [1].

• Fed decision (Dec 10)
  : 25 bps rate cut to 3.5%-3.75%, 1 additional 2026 rate cut forecast [1][4].
• SNB decision (Dec 11)
  : Rate held at 0%, Swiss Nov inflation 0% [1][2].
• European market movements (Dec 11)
  : Initial Stoxx 600 dip (-0.1%), close with STOXX 50E +0.11%, FTSE 100 +0.16%, DAX +0.27% [0][1].
• Key risks
  : Swiss deflation, Fed policy volatility, U.S. trade headwinds [1][2][4].