Inflation was the main theme this week. In the US, consumer prices rose 0.2% in July, bringing the annual rate to 2.7%, in line with expectations. What stood out was core inflation, up 0.3%, the fastest pace in six months. Producer prices also surged nearly 1%, the biggest increase in three years, raising concerns that tariffs could be lifting costs for consumers.
Markets carried the rate-cut conversation forward this week, but the tone shifted from speculation to near-certainty after softer US labour figures reinforced July’s weakness. Traders are now pricing more than 60bps of Fed easing by year-end, with September looking like the earliest realistic pivot.
Markets faced a cautious tone from central banks last week, but soft data and trade friction stirred fresh concerns. In the US, the Fed kept rates unchanged at 4.25% to 4.50% for a fifth meeting in a row.
It was one of those weeks where markets exhaled, slightly. The sense of tension that has been hanging over global trade talks finally loosened, with Washington striking deals with Japan, Indonesia, and the Philippines, while conversations with Europe edged closer to resolution.
This week felt like a tug of war between optimism and caution.
In the US, retail sales surprised to the upside and consumer sentiment held up, giving bulls something to cheer about. But June’s inflation numbers told a different story. Core CPI ticked up to 2.9% YoY, keeping the Fed firmly in wait-and-see mode.
