Week 33 (August 10-August 17, 2025)

The market has experienced a remarkably rapid rebound following the “tariff war” panic of early April.

Current consensus anticipates a rate cut by the Federal Reserve in September, with expectations for a total of two rate reductions throughout the year. However, with inflation holding near 3%, economic fundamentals alone do not provide clear justification for a rate cut at this time. It is likely that the Federal Reserve will reiterate its commitment to a long-term inflation target of 2%, while simultaneously highlighting emerging signs of labor market softness to support the case for policy easing.

In the past week, July’s inflation data showed signs of cooling, with headline CPI rising 0.2% month-over-month, while core CPI accelerated to 0.3%, pushing the yearly rate above 3% for the first time since February.

The Producer Price Index jumped 0.9%, driven largely by service sector costs and highlighting growing price pressures, possibly linked to higher tariffs.

Retail sales increase…