Global markets rode a volatile week shaped by shifting monetary policy expectations and geopolitical surprises. In the US, Powell’s Jackson Hole remarks landed on the dovish side, signalling risks have tilted toward labour softness and nudging the door open for a September rate cut. At the same time, the Commerce Department revised Q2 GDP up to 3.3% annualised, a firmer base than first thought. Core PCE eased to 2.9% YoY, keeping the disinflation trend intact even as consumer confidence slipped and hiring cooled. Put together, traders leaned into nearly 90% odds of a cut next month.
Markets spent the week waiting for Jackson Hole, and Powell didn’t disappoint. His message was softer than many feared: the Fed now sees the balance of risks shifting, and he even opened the door to a September cut. That was enough to steady nerves after five straight down sessions for Wall Street. By Friday, the Dow was at record highs, the S&P 500 rose, and only the Nasdaq lagged as tech finally cooled.
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.
