US Inflation and PBoC Policy Meeting: Markets in Focus — Week 39, 2025

Global Weekly Economic Review

The Federal Reserve responded to weakening job creation and persistent inflation by cutting rates 25 bps to 4.00–4.25%, its first move since December 2024. Projections signal an easing bias, with two more cuts expected this year to support labor demand. The current “no hire, no fire” labor market has sustained household income and prevented mass layoffs, though hiring remains muted.

Overall, the economy is balanced between steady consumer spending and weak business investment/construction, with tariffs and high rates weighing on growth. Inflation remains above target, leaving the Fed in a delicate position of easing policy while inflation risks persist.

Out of the US, global monetary policy took center stage this week, with central banks delivering a mix of cuts, holds, and surprises. The Bank of Canada resumed easing, trimming rates to 2.50% as growth softened, while Norway’s Norges Bank also cut to 4.00% but struck a hawkish tone, signaling only gradual reductions ahead. In the UK, the Bank of England kept rates steady at 4.00%, with one more cut still possible in November, though delays into 2026 remain a risk.

In Asia, the Bank of Japan held rates but hinted at tightening, with two policymakers voting for a hike and plans unveiled to sell ETFs and REITs. A rate increase as early as October is possible if data hold firm. By contrast, Bank Indonesia cut rates again to 5.00%, surprising markets with its third consecutive move. In Latin America, Brazil’s central bank held its Selic rate at 15.00%, unlikely to ease before 2026.

Meanwhile, China’s August data disappointed across the board—retail sales slowed to 3.4%, industrial output eased to 5.2%, and investment nearly stalled. Growth is expected to cool further to 4.8% in 2025 and 4.5% in 2026, with risks tilted to the downside.

Global Weekly Economy in Short— Mid-September 2025

United States

• Growth momentum held strong: GDPNow (Q3) revised to 3.4%, Retail Sales (Aug) +0.6% MoM, +5.0% YoY, and Philly Fed Manufacturing rebounded to 23.2.
• The labor market remained resilient, with Initial Jobless Claims falling to 231K.
• Housing sector weakened: Housing Starts -8.5% MoM, NAHB index at 32.
• Policy shift: Fed cut rates by 25 bps to 4.25%, signaling the start of an easing cycle.

Takeaway: The U.S. economy is resilient, led by consumers, though housing and industrial activity remain uneven.

United Kingdom

• GDP (Jul) stalled, offsetting Q2’s rebound.
• Retail Sales (Aug) surprised higher (+0.5% MoM, +0.7% YoY), but consumer confidence slipped to -19.
• Inflation (Aug): CPI steady at 3.8% YoY, Core eased to 3.6%.
• Fiscal stress: Public Borrowing surged to £18B.
• BoE: Held rates at 4.0%, with 2 members voting for cuts.

Takeaway: UK faces a stagnation-inflation trade-off — weak growth, sticky inflation, and widening deficits.

Eurozone

• Industrial Production (Jul): +1.8% YoY, Construction +0.48% MoM — signs of stabilization.
• Inflation (Aug): CPI steady at 2.0%, Core at 2.3%.
• ZEW Sentiment (Sep): sharp improvement (Eurozone 26.1, Germany 37.3), though current conditions remain deeply negative (-76.4).
• Bond yields across Germany, France, and Spain moved higher, highlighting fiscal and financing strains.

Takeaway: The Eurozone is at target inflation, but with fragile growth and fiscal risks.

Japan

• GDP (Q2): contracted -4.0% QoQ, annualized after strong Q1.
• Trade (Aug): Exports nearly flat (-0.1% YoY), Imports -5.2% YoY → deficit of -¥242.5B.
• Inflation (Aug): CPI/Core CPI at 2.7% YoY, above BoJ’s target.
• BoJ: kept rates at 0.50%, balancing weak growth and sticky inflation.
• Flows: Foreign investors bought bonds (+¥1.48T) but sold equities (-¥2.03T).

Takeaway: Japan shows stagflation risks — weak growth, above-target inflation, and defensive capital rotation.

China

• Industrial Production (Aug): +5.2% YoY (slower than expected).
• Fixed Asset Investment: only +0.5% YoY (vs. +1.6% prior).
• Retail Sales (Aug): +3.4% YoY, missing forecasts.
• House Prices: -2.5% YoY, the property sector is still weak.
• Unemployment: ticked up to 5.3%.
• Trade: Exports -1.2% YoY, Imports -4.1% YoY, Surplus +$6.5B.

Takeaway: China is in a fragile stabilization phase — activity missed expectations, property drag persists, and consumption remains soft.

Emerging Markets

• Brazil: Growth weak (IBC-Br -0.5% MoM), but unemployment improved to 5.6%. Rates steady at 15.0%.
• Argentina: Strong GDP (+6.3% YoY) and rare twin surpluses in budget (+1.6B) & trade (+1.4B). Unemployment fell to 7.6%.
• India: Reserves at $703B near record highs, trade deficit narrowed (-$26.5B). WPI inflation turned positive at +0.52%.
• Turkey: Budget posted a rare surplus (+96.7B), but FX reserves slipped to $84.5B.
• South Africa: SARB held rates at 7.0%; Retail Sales surged +5.6% YoY; CPI eased to 3.3%.

Takeaway: EMs show divergent paths — India and Argentina resilient, Brazil and Turkey constrained, South Africa stabilizing cautiously.

Global Overview

• Growth: U.S. leads advanced economies, while Europe stagnates, Japan contracts, and China struggles to stabilize. EMs mixed, with India outperforming.
• Inflation: Cooling in Europe & Japan, stable in the U.S., subdued in EMs.
• Policy: Fed and BoE shifted dovish; ECB’s path uncertain; BoJ cautious. EM central banks are largely holding rates.
• Risks: Fiscal pressures in the UK/EU, property drag in China, stagflation risk in Japan, uneven EM resilience.

Net takeaway: The global economy is split — U.S. remains robust, Europe fragile, Japan contracting, China slowing, EMs diverging. With Fed easing underway, capital flows and FX dynamics will reshape market conditions in Q4.

USA

The economy remains stronger than expected, driven by consumer spending and selective industrial strength, but housing weakness, tighter liquidity, and uneven capital flows highlight vulnerabilities. The Fed’s path forward will remain highly data dependent.

U.S. Weekly Economic Review — Mid-September 2025

The U.S. economy maintained stronger-than-expected momentum in mid-September. The Atlanta Fed’s GDPNow estimate for Q3 was revised up to 3.4%, underpinned by solid retail sales and surprising strength in the Philadelphia Fed manufacturing survey, even as the New York Empire State index highlighted ongoing regional weakness. Industrial production managed a small monthly gain, though year-over-year growth slowed, and capacity utilization held steady.

Consumers remain the backbone of growth. Retail sales in August outperformed across all measures, rising 0.6% month-over-month and 5% year-over-year, with strong contributions from core and control categories. However, housing continues to drag: builder sentiment fell to its lowest since the pandemic, housing starts dropped 8.5%, and permits fell for a fifth consecutive month, signaling deeper weakness ahead.

The labor market remains resilient, with jobless claims well below expectations and continuing claims edging down, reinforcing employment stability. Inflation pressures were mixed—import prices showed little momentum, while export prices climbed, reflecting steady demand. Energy data pointed to softer natural gas prices from higher storage, while oil rig counts suggest stable output capacity.

Policy developments took center stage as the Federal Reserve cut rates by 25 bps to 4.25%, its first move of 2025. The updated dot plot suggested scope for as many as three more cuts this year, though robust spending and activity data may complicate the pace of easing. Market pricing shows a high probability of another cut in October. Meanwhile, liquidity remains tight, with bank reserves declining, even as foreign buying of Treasuries provided some relief.

U.S. Weekly Economic Outlook

The week opens with the first hard read on September activity from the Housing markets and S&P Global flash PMIs (Tue–Wed), which will show whether August’s rebound in manufacturing and solid services momentum carried into September amid tariff noise and cooling housing. The flash releases are slated around September 23–24, with markets focused on new orders, prices-paid, and employment sub-indexes for hints on demand resilience and cost pressures.

The U.S. housing market remains frozen as high mortgage rates and a softer labor market keep buyer demand weak. July existing home sales ticked up 2.0% but are basically flat year over year (+0.8%), while new home sales slipped 0.6% and are down 8.2% from a year ago; builder incentives like price cuts and rate buy-downs are losing effectiveness. Even though mortgage rates recently fell to an 11-month low (6.26%), that won’t meaningfully lift August sales because most closings reflect earlier 6.7%–6.8% rates and rising unemployment. Forecasts: August new home sales −0.6% to a 648K SAAR; existing home sales −1.5% to 3.95M SAAR.

Mid-week attention shifts to capex and supply-chain tone via the Durable Goods (M3) August report on Thursday, Sep 25, where aircraft and autos will drive headline volatility, but core non-defense capital goods orders will be the signal for Q4 investment plans. U.S. manufacturing remains under pressure: demand for durables has firmed slightly and output is up this year, but gains are narrow, and PMI sentiment is soft as policy uncertainty stalls capex. August durable-goods orders are expected to rise 0.6%, largely on transportation (a rebound in non-defense aircraft and firmer autos); ex-transport, orders likely fell 0.2%. After July’s 3.3% jump in nondefense steady supporting shipments (aircraft-boosted), some payback is likely, though core shipments excluding aircraft remain steady—supporting a decent Q3 outcome for real equipment investment.

The marquee macro risk lands Friday, Sep 26, with Personal Income & Outlays (August), including the PCE price index, the Fed’s preferred inflation gauge. After the Fed’s September cut, traders will scrutinize core PCE’s month-over-month pace and services inflation to calibrate odds of another move at the October meeting. Consumer spending remains resilient but choppy. After a 0.3% real gain in July, and a likely upward revision to Q2 on stronger service real spending is expected to rise another 0.2% in August. Retail sales beat expectations, helped by autos (partly a pull-forward ahead of EV tax credit expiry) and solid nonstore spending. Households face headwinds—higher essential prices, tariff-driven price fears, and a tightening job market. Income growth has cooled; August is projected to be +0.3% nominal (~0% real), still sufficient to support spending but pointing to slower consumption into year-end. Looking ahead, friendlier tax policy could offer support in 2026. Inflation should be in line with signals from CPI/PPI: PCE +0.3% m/m; core PCE +0.2% m/m, leaving core at 2.9% y/y.

Wall Street

After the Fed’s decision, equities initially reacted positively. However, the most consequential Fed meeting in a decade—reflected in both its decisions and forecasts—created confusion among investors and market participants. That uncertainty deepened as more economic data came out in subsequent days, leading to reversals in the charts before Friday’s stronger close. A similar pattern could emerge again this week, especially if incoming data confirm stronger growth and rekindle inflation concerns, which now seems quite likely.

In the week ahead, markets face a heavy data calendar, with three key releases setting the tone: flash PMIs (Tue/Wed) for September momentum, Durable Goods (Thu) as a gauge of capital expenditure (with focus on core non-defense ex-aircraft), and Personal Income & Outlays including PCE (Fri), the Fed’s preferred inflation measure. A softer core PCE alongside steady PMIs would reinforce the “slow cut” narrative and support risk appetite, while a hotter PCE or weaker orders could tighten financial conditions and limit rallies.

Rate-sensitive sectors such as homebuilders and consumer discretionary remain in focus, as lower post-Fed mortgage rates could support housing activity. Housing stocks have already outperformed in the rate cut, making them particularly sensitive to any surprises. In effect, while lower rates can support housing, they also raise GDP expectations, which could in turn slow the pace of expected Fed cuts.

Technically, the trend remains bullish, with RSI in overbought territory and rising buy demand, though cautiously. Bulls could lose ground if prices fell below the 6,350 level, while holding this support would keep the door open for new higher highs.

U.S. Dollar (USD)

When markets move higher across the board, including USD, gold, and equities, it often signals conflicting dynamics. After the Fed’s statement, the dollar dropped to its lowest level in over two years. But the dot plot, Chair Powell’s comments, and subsequent data releases shifted sentiment, helping the greenback recover above the 97-mark.

The dollar begins this week on the softer side, near 2022 lows, with its direction hinging on Friday’s PCE report and PMI price components. A softer core PCE and benign PMI prices would likely extend USD weakness, while stronger inflation or firmer investment signals could stabilize or lift the dollar. Fed cut odds into October remain high, reinforcing a “sell-the-rally” bias unless data come in hawkish.

It’s also important to note that economic weakness in other regions—particularly the Eurozone and UK—dampens demand for their currencies, indirectly supporting the DXY.

On the technical front, DXY continues to trade sideways as sectors push against each other without clear dominance. The 96–98 range marks the current band of consolidation, and a breakout on either side would set the next trend.

China

China’s economy in August reflects broad weakness with isolated stabilizations. Industrial output and exports show signs of improvement, but fixed investment, retail sales, and the labor market softened. The property sector remains under pressure with house prices still falling, though at a slower pace.

The domestic demand slowdown is evident, while the external sector struggles to sustain momentum. With inflation subdued and unemployment edging higher, policymakers face continued pressure to deliver targeted stimulus.

Net takeaway: The Chinese economy is in a fragile stabilization phase — activity indicators improved slightly but remain below expectations, property remains a drag, and consumption is not rebounding strongly. Policy support will likely remain accommodative heading into Q4.

Weekly Economic Review in short!

Growth & Activity

• Industrial Production (Aug): +5.2% YoY (vs. 5.7% expected, unchanged prior), showing slowing momentum.
• YTD Industrial Output (Aug): +6.2% YoY (vs. +6.3% prior), signaling only marginal gains.
• Fixed Asset Investment (Aug): +0.5% YoY (vs. +1.6% prior, +1.5% expected), a sharp deceleration highlighting weaker business and infrastructure spending.
• Retail Sales (Aug): +3.4% YoY (vs. +3.7% prior, +3.8% expected).
• YTD Retail Sales (Aug): +3.67% YoY (vs. +3.84% prior).
• Consumer activity remains soft, reflecting subdued confidence and labor market caution.

Inflation & Prices

• House Prices (Aug): -2.5% YoY (vs. -2.8% prior) still in contraction but easing slightly.
• Persistent property weakness continues to weigh on household wealth and investment sentiment.

Labor Market

• Urban Unemployment Rate (Aug): 5.3% (vs. 5.2% prior/expected).
• This uptick suggests renewed labor market strain, especially among younger workers.

External Sector

• Exports (Aug): -1.2% YoY (vs. -1.3% expected, -4.3% prior), a relative improvement, though still contracting.
• Imports (Aug): -4.1% YoY (vs. -4.0% expected, +3.3% prior), a sharper-than-expected decline.
• Trade Balance (Aug): +$6.51B (in line with forecasts, vs. +$9.08B prior).
• External demand remains fragile, with imports particularly weak.

China in the Week Ahead

China enters the new week with its economy showing further signs of losing steam: industrial output is slowing, retail sales remain weak, investment is lagging, and stress in the property market persists. Unless new stimulus is introduced soon or consumer demand improves, growth looks vulnerable heading into Q4. Markets will be paying close attention to policy announcements and external demand signals, which will be key determinants of near-term momentum.

The People’s Bank of China (PBoC) will meet at the start of the week. In mid-September, the PBoC left policy rates unchanged even as the U.S. delivered a rate cut, preferring instead to rely on fiscal measures and targeted support. Any fresh announcements or even rumors of additional stimulus—whether fiscal or monetary—will be closely scrutinized. Given August’s weak results, markets are already expecting measures to bolster consumption and stabilize property.

Consumer and housing behavior will also be closely watched. Beyond headline data, smaller indicators such as property developer activity, durable goods sales, and auto sales could reveal whether sentiment is stabilizing or deteriorating further.

External demand remains another concern for the world’s largest manufacturing hub. Trade tensions, particularly with the U.S., continue to act as a headwind. Any sign of weakening exports or diversion toward alternative markets such as Southeast Asia or Latin America will be critical.

Finally, inflation dynamics will help shape expectations. With PPI still under deflationary pressure, any pickup in consumer or producer prices—especially input and raw material costs—could shift market expectations for further policy easing.

Risks & Scenarios

• Downside: If stimulus measures are seen as weak or too slow, confidence may erode further, putting pressure on consumption and investment. A sharper decline in exports or new trade restrictions could push GDP growth forecasts for 2025 below the ~5% target, prompting stronger policy action.
• Upside: Stabilization in consumer spending (particularly in services), stronger housing sales in Tier-1 cities, or more visible credit and investment support could help China stay closer to its growth goals and reduce downside risks.

Chinese Yuan (USD/CNH) Outlook

In the near term, USD/CNH looks to be ending its sideways consolidation within a defined range, with 7.11–7.12 acting as pivot support and 7.18–7.20 as resistance. A breakout in either direction will likely require a significant macro or policy catalyst. At present, price action is showing signs of testing below 7.11; if confirmed, bears may push toward lower levels.

The short-term trend is neutral to mildly bearish, though momentum remains weak. Divergences (such as falling volume alongside rising prices) highlight risks to the upside.

Technical levels:

• Support: 7.11, 7.05
• Resistance: 7.13–7.17

Gold — Current Condition & Weekly Outlook

With policy easing underway, real yields edging lower, and macro uncertainty still elevated, dips remain favored for medium-term buyers.

Gold enters the week with strong macro tailwinds. The Fed’s September 25 bps cut reinforced expectations for further easing into year-end, while a softer dollar and ongoing geopolitical risks continue to attract dip-buyers. Recent headlines have highlighted how the combination of rate cuts and safe-haven demand has propelled bullion to record levels this year, with some banks projecting much higher long-run targets if the easing cycle continues. The key near-term catalyst is Friday’s PCE inflation report. A benign core reading would validate the “slow-cut” narrative and keep real yields drifting lower—typically bullish for non-yielding assets like gold.

Beyond the Fed, central bank purchases remain a structural driver of demand, while signs of slowing growth in China add a defensive bid as investors hedge downside risks. China’s August data—sluggish retail sales and weaker industrial output—kept expectations of additional policy support alive. If Beijing signals more stimulus, it could buoy commodities broadly while also weakening the dollar via the global-growth channel.

Key drivers in the week ahead:

• PCE (Fri): the primary volatility catalyst for real yields and the dollar.
• PMIs (Tue/Wed): critical for gauging growth and inflation trends through prices-paid components.
• ETF flows and central-bank purchases: Any signs of renewed inflows would amplify upside momentum.

The risk skew remains tilted in gold’s favor unless data show a re-acceleration in inflation that pushes terminal-rate expectations higher. A stronger-than-expected PCE and rising real yields could put gold in a vulnerable spot, triggering a two-stage pullback: first to the breakout shelf, then toward the medium-term moving average cluster.

Technical Outlook

The technical picture remains constructive but stretched. Momentum gauges are elevated following the post-Fed surge, favoring a “buy dips, not breakouts” approach in the near term. The prior breakout zone serves as the first support, with the rising 20-day EMA at $3,577 as the critical line-in-the-sand. A daily close below this level would warn of a deeper pullback toward the 50-day trend line near $3,477, where trend-followers are likely to step back in.

On the upside, a sustained close above last week’s spike high would confirm that the path of least resistance remains higher. Traders should also monitor positioning signals: if prices make new highs without confirmation from RSI or MACD, it could point to short-term exhaustion and the risk of a corrective pause.

Crude Oil — Current Condition & Weekly Outlook

Oil enters the week caught between three forces: near-term inventory dynamics, supply signals from OPEC+ and U.S. shale, and the macro demand path heading into Q4.

The latest EIA Weekly Petroleum Status Report showed commercial petroleum inventories rising, with a notable build in distillates. While seasonally typical, it underscores how quickly balances can loosen in the shoulder season if demand softens. At the same time, U.S. drilling activity has increased for a third consecutive week: Baker Hughes reported the total rig count at 542, with oil rigs up two to 418—the highest since July—highlighting that U.S. supply capacity is far from static.

Structurally, the outlook remains divided. OPEC continues to emphasize strong demand into the second half of the year and beyond, even as it cautiously raises output to defend market share. Meanwhile, the IEA projects robust supply growth through 2025–26, implying that balances could loosen if demand falters. This divergence creates headline risk: any sign of weaker OPEC+ compliance or trimmed demand guidance could swing flat prices and forward curves sharply. For the coming days, inventory data (Wednesday), rig counts (Friday), and OPEC+/producer headlines are the main catalysts. In addition, global PMIs from both developed and emerging economies will help clarify activity levels and the likely trajectory for oil demand.

Fundamentals: The bull case rests on a risk-on macro backdrop: a softer U.S. PCE print and steady PMIs would lift cyclical demand expectations, especially if inventories tighten seasonally. The bear case echoes the IEA’s surplus narrative, reinforced by product builds and rising U.S. rigs—pressuring time spreads and capping rallies. Refining margins will be key for confirmation: softening cracks (diesel/gasoline) would validate a demand-led fade, while firm cracks alongside inventory draws would argue for a leaner setup heading into October. Overall, the stance remains tactically neutral with a slight downside bias unless EIA data flip decisively to sustained draws.

Technical: Crude continues to coil in the bigger picture, trading just under its 50-day moving average. For WTI, risk can be defined by two zones:

• Resistance: Immediate resistance sits at the 50-day moving average, while major resistance aligns with the 200-day at $66.57.
• Support: Key support lies at the multi-week band around $61.20, formed by repeated failures after headline-driven rallies.

A decisive break above resistance would likely require either a bullish EIA surprise (large draws in crude and products) or a credible supply disruption. Conversely, a clean break below $61 on rising volume would open the door to retesting prior quarterly lows.

Crypto & Bitcoin — Current Condition & Weekly Outlook

Crypto begins the week navigating a familiar macro cross-current. The Fed’s 25 bps rate cut was risk-positive, but forward guidance suggested fewer cuts ahead than markets had anticipated. That shift dented risk appetite and even flipped U.S. spot bitcoin ETF flows negative for a day. Flow sensitivity remains the clearest real-time gauge of institutional demand; after months of mainstream adoption, spot BTC and ETH ETFs now hold substantial assets, making daily creations and redemptions a key driver of intraday price action and market basis. Looking ahead to Friday’s PCE inflation data, a softer print would likely ease real yields and support crypto beta, while a hotter reading would favor consolidation or trigger a deeper pullback.

On the micro side, funding rates and perpetual swap basis have normalized from prior extremes, while on-chain activity has steadied at mid-cycle levels—neither overheated nor depressed. What has meaningfully shifted in 2025 is the participation mix: systematic allocations via model-driven mandates and retirement-linked ETF flows. These flows help dampen volatility on calm macro days but amplify swings when surprises hit. For this reason, Friday’s PCE report and PMI price components earlier in the week could matter for BTC as much as they do for tech equities, both trading like high-duration assets when real yields shift.

Technical Outlook

BTC remains in a broad uptrend channel extending from last year’s base, though near-term price action is choppy. The 50-day moving average at 113,300 serves as initial dynamic support, while the 100-day moving average at 109,400 anchors primary trend support, maintaining the broader bullish structure intact. However, repeated failures near the prior swing-high zone have created a supply shelf, highlighting the need for conviction to break higher.

• Bull case: A daily close above 118,000 on rising volume would clear resistance and set sights on the next psychological round number above.
• Bear case: A decisive close below the 50-day moving average would expose the 100-day moving average and the prior breakout shelf as downside targets.

Momentum signals should also be monitored: if prices push to new highs while RSI or MACD fail to confirm, it could warn of a short-term bull trap.