President-elect Donald Trump's tariffs and political crises in France and Germany have darkened the outlook for the euro area.

While the Federal Reserve is expected to cut its key interest rate next week, stubborn inflation could pressure the central bank to keep rate cuts few and far between next year.

With interest rates, for example, some short-term rates have been trending downward, such as with the Federal Reserve starting to cut the federal funds rate. Meanwhile long-term ones such as 10-year Treasuries or 30-year mortgages have remained relatively high or even increased in recent months.

Fed-funds futures now point to a nearly 100% chance that Fed officials opt for another quarter-point cut next week.

Inflation in November rose modestly, with housing costs continuing to be a major factor in price increases. However, the Fed is expected to proceed with an interest rate cut next week.

A falling-interest-rate environment is generally a positive catalyst for the stock market. With lower rates from risk-free investments such as CDs, more money rotates into riskier assets like stocks. Plus, lower borrowing costs make people more comfortable with spending money, leading to increased economic activity.

The European Central Bank is all but certain to cut interest rates again on Thursday and signal further easing in 2025 as inflation across the euro zone is nearly back at target and the economy is faltering.

Faced with a stuttering economy, political turbulence in the eurozone and the prospect of renewed trade tensions with the United States, the European Central Bank is Thursday set to cut interest rates again.