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Daily Economic Update
26.08.2025US: Trump fires Fed Governor Cook but the courts will have the final say. Further intensifying pressure on the Federal Reserve, President Trump fired Fed Governor Lisa Cook from her post following allegations of a mortgage fraud. Cook responded by saying that the President did not have the authority to do so, ruled out stepping down, and hired a lawyer to contest the decision. Hence, the matter will be decided by the courts, likely the Supreme Court eventually. If the US administration is successful in this endeavor, Trump’s appointees, Waller, Bowman, Miran (if confirmed by the Senate), and Cook’s replacement, will have a majority in the seven-member Fed Board of Governors. The real issue is whether this majority is going to be influenced by political reasons when conducting monetary policy, which could very well be the case given Trump’s open desire to influence such policy. The risk is not only in having one more vote in favor of cutting rates, but in the fact that the seven-seat Fed Board of Governors has the ultimate authority to approve the appointments of the Presidents of the regional Federal Reserves, of whom five are voting members of the FOMC in any FOMC meeting. Hence, effectively, the firing of Governor Cook is an attempt to take control of the whole FOMC. An independent Fed is a bedrock of economic and financial stability, and both will be at risk if that independence is undermined. The market reaction has been negative this morning with a drop in US treasuries (mainly at the long end) and a fall in US equity futures. Trump also threatened to impose additional tariffs and introduce curbs on US high-tech exports for countries levying or seeking to levy ‘digital taxes’ on US tech companies. Currently, some countries, including the UK and several EU countries, already apply taxes in some form on the digital operations of media and tech corporations. Canada had previously dropped its plans to impose these taxes as part of its trade negotiation with the US.
Kuwait: Household credit grows at the fastest monthly rate in three years. Domestic credit increased by a solid 0.9% in July, driving up YTD growth to 5.6% (7.5% y/y). Growth in July was broad-based, with household credit recording its fastest monthly increase in three years, business credit resuming its growth after a weak June, and lending to banks/financial institutions continuing to power ahead. Business credit increased by 0.5% in July, driving up YTD growth to 4.6% (6.3% y/y). Growth in July was solid for nearly all sectors with oil/gas (+1.7% m/m) and industry (+1.5%) in the lead. On a YTD basis, ‘other services’ (+6.5%), ‘trade’ (+6.4%), and ‘industry’ (+6%) are the fastest growing. Household credit logged its strongest monthly growth in three years at 0.9%, pushing the YTD increase to 2.2% (3.9% y/y). As we have written before, in both 2023 and 2024, household credit growth was much stronger in the second half of the year than in the first half, and July’s expansion is signalling that this might be the case in 2025 as well. Lending to banks and financial institutions had another very strong month and is up by a sky-high 26% YTD (KD579 million). Meanwhile, driven by the private sector, resident deposits increased in July and are up a limited 2.2% YTD (4.2% y/y). The growth in private-sector deposits has been stronger at 4% YTD while government deposits have been a drag, falling by 11% YTD.
Saudi Arabia: Wider trade surplus in June. The merchandise trade surplus widened to a four-month high of SAR22 billion in June (11% y/y), up from a downwardly revised SR6.7 billion in May – the lowest since December 2020. Exports grew at the fastest pace in almost three years (3.7% y/y) after four consecutive months of contraction, lifted by strong growth in non-oil exports (22% from 7% in May) coupled with a much softer decline in oil exports (-2.5% from -21% in May). Non-oil export growth was led by machinery and equipment (168%), chemical products (9%), and metals exports (6%), constituting around 55% of total non-oil exports, which more than offset a sharp decline in transportation equipment exports (-32%). Meanwhile, import growth eased to 1.7% y/y, the slowest in 18 months, mostly from a decline in the imports of vehicles, aircraft and transportation equipment (13%), mineral (26%) and plant (23%) products, and base metals (10%). In the coming months, we expect to see a continued improvement in the trade balance supported by the ongoing recovery in oil exports and sustained growth in non-oil exports.
UAE: Domestic credit growth softens in May while deposit growth accelerates. Domestic credit growth eased in May to 4.8% y/y, from April’s 5.1% as the growth in private-sector credit, which constitutes more than 70% of total domestic credit, slowed to 7.9% y/y (8.4% in April) on easing personal credit growth (18.2%) from its historical high seen in April (18.5%). Moreover, credit to the public sector (Government plus GREs) saw a steeper decline of 2.8% y/y in May. On a YTD basis, domestic credit growth stood at 2.5% compared with 3.7% in the corresponding period of 2024 owing mainly to slower growth in private-sector credit (4.0% versus 4.3%) as well as a decline in public-sector credit (-1.7% versus +3.0%). On the other hand, growth in resident deposits picked up to 10.8% y/y in May from 7.5% in April due to a softer decline in government deposits (-6.9% versus -17.8% in April) and a stronger growth in private-sector deposits (15.5% versus 14.7%). The slower credit growth chimes with our projection that the non-oil sector would see slower, but still robust, growth of around 4% this year.
Egypt: A one-year term for official positions in the Egyptian financial sector. The Official Gazette announced the Prime Minister's decision to appoint Islam Azzam as Chairman of the Egyptian Exchange (EGX) for a one-year term, succeeding Ahmed El Sheikh, who served in this position since 2023. Islam Azzam is an Egyptian economist who served as Vice Chairman of the Egyptian Financial Regulatory Authority (FRA). Also, Mohamed Sabry has been appointed as deputy chairman for a one-year term succeeding Heba El Serafi. These new appointments come at a time when the EGX has risen by 20% YTD and new initial public offerings (IPOs) are in the pipeline to commence the state’s privatization program, which had been stalled for the past couple of years. The Prime Minister announced earlier that the government expects to raise $4-5 billion from selling stakes in 11 state-owned companies during the current fiscal year 2025-26.