Archive

Activity’s Tariff Hangover In Q2

• GDP growth broadly beat expectations again in Q2 on both sides of the tariff disruption. Euro area growth slowed by less, while the US rebounded vigorously.
• Temporal distortions to demand didn’t open up slack as European supply growth stays stagnant. Surveys suggest it won’t appear in Q3 either as demand growth rebounds.
• Underlying US GDP growth may have slowed, but the extent is modest and questionable. Rolling resilience should keep delaying rate cuts, preventing them from occurring.

By Philip Rush

US: Policy Rate Held At 4.5% (Consensus 4.5%) in Jul-25

• The Federal Reserve maintained rates at 4.25%-4.5% in a 9-2 decision, with Governors Bowman and Waller dissenting in favour of a 25bp cut—marking the first double dissent by Board members since 1993 amid deepening divisions over the appropriate timing for policy easing.
• The Committee downgraded its growth assessment while acknowledging that inflation remains "somewhat elevated". Chair Powell emphasised no decisions have been made regarding September rate cuts, maintaining a cautious, data-dependent approach.
• Future interest rate decisions will hinge on the persistence of tariff-induced inflation, labour market resilience, and the anchoring of inflation expectations, with dissenting governors arguing that transitory tariff effects should not preclude supporting employment through rate cuts

Opec: Twist Or Stick?

• The further acceleration by ‘Opec+ eight’ in unwinding the second package of voluntary output cuts was a surprise, albeit one that left markets unmoved.
• The cartel now appears to be firmly on track to complete its unwinding in September, even though its stated justifications for increasing output remain highly questionable.
• Despite downside global growth risks, the Saudis in particular may press to start unwinding the first package, a move which may be announced as early as next week.

By Alastair Newton

US Politics: ‘As Ye Sow…’

• The Epstein files row has intensified deep splits in the MAGA movement and triggered persistent demands for accountability.
• Trump’s recent pivot towards supporting Ukraine and critical foreign policy shifts have fuelled further rifts among his traditional base.
• Despite controversies, the key midterm factor remains Trump’s economic agenda, as tariffs and fiscal changes may hit his core supporters hardest.

By Alastair Newton