Global Macro Trends
Fed resumes monetary easing in September amid rising employment risks
September 2025
The announcement of trade agreements between the United States and most of its trading partners and a 90-day extension of the China trade truce (effective until November 10) has led to a notable reduction in trade and economic policy uncertainty, although levels remain elevated compared to historical norms. Moreover, the recently established tariff rates are substantially higher than those enforced last year. As a result, companies are increasingly pressured to redirect exports previously destined for the U.S. to alternative markets, leading to increased international competition and further compression of profit margins.
In the US, the Supreme Court's decision regarding President Trump's efforts to remove a Federal Reserve governor, considered an unprecedented challenge to the Fed's independence, and the constitutionality of imposing widespread tariffs without Congressional approval are expected to significantly influence forthcoming developments. Additionally, as the production costs of domestically manufactured goods rise - especially when these goods rely on imported raw materials and intermediate products – the potential for heightened inflationary pressures is significantly increased. At the same time, the recent deterioration in labour market conditions is evident, with workers who lose their jobs finding it increasingly difficult to find new ones. In this context, the Fed's monetary policy, which aims to balance the dual mandate of low inflation and maximum employment, is expected to face significant challenges. A positive development is the continued robust performance of the economy, as evidenced by recent data and key leading indicators.
In the Eurozone, challenges remain. The trade agreement with the US has prevented a general deterioration in bilateral relations, but there are concerns that it favours the US side more. At the same time, the move away from Russia’s energy and the transition to more environmentally friendly energy sources continues to present the challenge of securing sufficient supplies of energy products at reasonable costs for European businesses. Additionally, the interplay of rising defense expenditures, elevated public debt in countries such as France, demographic challenges, and modest economic growth places considerable strain on government budgets. This often necessitates unpopular spending reductions, thereby heightening the risk of political instability. Nevertheless, moderate growth persists at a slightly higher rate than expected, while the unemployment rate remains at a historically low level.
In China, recent economic data suggest a slight moderation in the growth rate. However, positive developments in leading indicators observed in August support the likelihood of achieving approximately 5% growth for 2025. Sustaining constructive relations with the US is regarded as essential for maintaining robust growth rate in 2026.