Global Markets Overview is published and updated every month. This includes what has happened in markets, our macroeconomic outlook and price updates on assets such as government bonds, credit and equities.
In this Global Markets Overview
July U.S. inflation data, released in August, confirmed a modest reacceleration in price pressures. Watch out latest video to find out more.
The top highlights from our latest Global Market Overview.
- Headline CPI rose 0.2% m/m (2.7% y/y), while core CPI increased 0.3% m/m (3.1% y/y). Goods prices, which had been a disinflationary force for much of the past year, firmed noticeably. Core PCE, the Federal Reserve's preferred inflation gauge, climbed to 2.9% y/y, marking the fourth consecutive monthly increase and remaining above the central bank's inflation target.
- Tariff pass-through is increasingly evident, with a clear divergence between tariff-exposed and non-tariff categories. Prices for apparel, furniture, household furnishings, and motor vehicles – all subject to higher duties – rose sharply, while non-tariffed goods were little changed.
- Upstream cost pressures are also visible: July PPI surprised sharply to the upside, with both headline and core up 0.9% m/m – the largest monthly gain since March 2022. This aligns with the Federal Reserve's September Beige Book (a qualitative review of key regional economic conditions), which also cited widespread input cost pressures.
Further tariff-related effects on inflation are likely in the near term. The effective tariff rate paid on dutiable goods remains below the announced tariff rate but is quickly catching up. The Beige Book also noted that businesses are cautiously raising prices, with more likely in the months ahead.
We expect U.S. core inflation to peak (around 3.0%-3.5%), with slowing economic growth and a cooling labor market limiting second-round effects. As a result, the Federal Reserve is likely to resume cutting policy interest rates to support economic activity. Chair Powell's Jackson Hole remarks were consistent with this, emphasizing stable inflation expectations and a labor market not tight enough to drive wage inflation.
Markets currently price in 25–50 bps of cuts by year-end and around 100 bps over the next 12 months, which we view as reasonable. Whilst we expect inflation to continue to increase this year in the U.S., the Fed is increasingly of the view that this is an on-off price increase, so it is focusing more on offsetting weakening growth and labor markets. U.S. and global growth looks likely to moderate over the second half of 2025, but the combination of monetary easing and supportive U.S. and German fiscal spending should aid a rebound in economic activity into 2026. In our view, this sets up a constructive backdrop for financial assets as we move into 2026.
Video transcript
Global Markets Overview: September 2025
SAFWAN MORSHED: As we approach the end of Q3, the US economy continues to face a delicate balancing act. Inflation remains above target while economic momentum has started to fade. In August, headline US CPI was broadly in line with expectations. However, monthly price gains accelerated versus July.
