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Daily Economic Update
14.09.2025US: Tariffs continue to gradually push up inflation and jobless claims jump; Fed rate cuts expectations intact. CPI inflation in August rose to a seven-month high of 2.9% y/y (0.4% m/m) from July’s 2.7% (0.2% m/m). The monthly rise was primarily driven by soaring costs of food, energy goods, and shelter, as the gain in a narrow measure excluding these items slowed to 0.3% m/m from July’s 0.4%. Core prices rose at a broadly steady pace of 3.1% y/y (0.3% m/m). Tariffs continued to gradually lift inflation with core inflation at a six-month high despite the heavyweight shelter inflation softening to 3.6% y/y in August from 4% in March. Core CPI excluding shelter was up to 2.7% y/y in August from 1.8% in March (before most tariffs kicked in) as core goods inflation rose to 1.5% y/y from -0.1%. Moreover, durable goods inflation rose to 1.9% y/y in August from -1.2% in February. We think it is going to take several more months for the full impact of the tariffs to be seen in the inflation numbers. While still early, speedy hikes in prices of some leisure-related services categories (airfare and hotel accommodation) could indicate that consumers may not yet be pulling back spending on discretionary services, signaling robust health in household finances amid skyrocketing stock markets and elevated residential property prices. Elsewhere, indicating a further weakening in the labor market, initial weekly jobless claims (w/e Sep 6) jumped to a near four-year high of 263K from 236K the previous week, with continuing claims (w/e Aug 30) remaining steady at elevated levels (1.94mn). However, the weekly claims have likely been impacted by the Labor Day holiday (holidays typically lead to distorted claims numbers) and an outsized increase in claims in Texas, indicating that the spike might partially have been driven by one-offs. Combined, the broadly inline inflation numbers along with the fragile employment conditions saw future markets keeping their bets of a 25-bp interest rate cut at this week’s FOMC meeting intact, with a cumulative three cuts expected by the end of the year.
Eurozone: ECB holds rates steady as expected; Fitch downgrades France’s credit rating. On Thursday, the European Central Bank (ECB) kept key interest rates unchanged, maintaining the deposit rate at 2.0%, the second consecutive meeting without a rate change. ECB President Christine Lagarde emphasized that the euro area economy is showing resilience and that inflation is broadly aligned with the 2% medium-term target. She added that “we continue to be in a good place” when it comes to monetary policy, that “risks were more balanced” now, and that “trade uncertainty clearly diminished.” The ECB updated its growth forecast for 2025 to 1.2%, up from 0.9%, while projections for 2026 and 2027 were slightly revised to 1.0% and 1.3%, respectively. Inflation is expected to average 2.1% in 2025, then ease to 1.7% in 2026 and rise modestly to 1.9% in 2027. The ECB reiterated its data-dependent approach and did not commit to a specific rate path, leaving future decisions open to incoming economic developments, with the market expecting either no more cuts, or maximum one cut, through end-2026. Meanwhile, on Friday, Fitch Ratings downgraded France’s sovereign credit rating from AA- to A+, citing rising debt levels, political fragmentation, and weak prospects for fiscal consolidation. The downgrade followed the collapse of Prime Minister François Bayrou’s government and came just as new PM Sébastien Lecornu was appointed.
UK: Economy stagnates in July after a robust performance in June. GDP in July flatlined (0% m/m, 1.4% y/y) following solid growth of 0.4% (1.4% y/y) in June, in line with the street projections. While services rose slightly, by 0.1% m/m, industrial production contracted 0.9%, driven by an outsized 1.3% fall in manufacturing output. After recording average growth of 1.3% y/y in H1, the momentum could slow in H2 given a higher base from last year, fading effects of activity frontrunning US tariffs, and continued uncertainty about the Autumn budget (pushed to November 26), in which the government is expected to announce fresh fiscal tightening measures. Despite the weak economic backdrop, the BoE is widely seen keeping its policy rate unchanged at 4% at the MPC meeting later this week concerned by higher inflationary pressures after cutting the bank rate by 100 bps since August 2024.
Kuwait: KPC looking at monetizing oil infrastructure assets through leases. Kuwait Petroleum Corporation (KPC) is exploring leasing part of its pipeline network to raise revenues for its investment plan. While the plan has not been officially confirmed, it has been reported that the state’s energy producer is looking to follow Saudi Aramco and the UAE’s ADNOC, which monetized parts of their respective pipeline networks through sales and leaseback arrangements to BlackRock Inc among others, and raise possibly $5-7 billion in the process. KPC could be looking at leasing thirteen pipelines over a period of twenty-five years, the proceeds from which would partly help fund the organization’s ambitious $65 billion investment plan.