Economics Weekly: Fed in Focus
US/Eurozone: Fed’s independence and Trump’s IEEPA tariffs under scrutiny; ECB’s monetary decision to arrive 11 Sep. Regardless of the outcome of Donald Trump’s attempts to ous...
Chief Investment Office - Hong Kong5 Sep 2025
  • US/Eurozone: Between political pressure and signs of a weakening labour market, the FOMC is heading towards cutting the policy rate; Trump asks the Supreme Court to allow IEEPA tariffs after the federal appeals court ruled against him
  • Indonesia: Escalating protests have settled after the government’s rollback of a few contentious announcements; while economic impact is not yet evident, BI may ease further than our baseline forecast to 25 bps cut, subject to rupiah volatility
  • India: GST rationalisation will be demand-accretive, positive for 2HFY26 and FY27 growth; fiscal impact is expected to be modest
  • Japan: PM Ishiba’s grip on power remains under scrutiny as LDP Secretary General Moriyama intends to resign, taking the responsibility for the coalition party
Article image
Photo credit: Unsplash
Read More

US/Eurozone: Fed’s independence and Trump’s IEEPA tariffs under scrutiny; ECB’s monetary decision to arrive 11 Sep. Regardless of the outcome of Donald Trump’s attempts to oust Federal Reserve Board governor Lisa Cook, it is clear that between political pressure and signs of a weakening labour market, the FOMC is heading toward cutting the policy rate. The near-term communication may be one of data-dependence and part of the transitory nature of pipeline tariff-induced inflation with the end outcome being a series of rate cuts in the next 12 months. It may happen mostly under Fed Chair Powell’s tenure before it ends in May 2026, but that’s not relevant any longer, in our view. The bottom line is that short-term US rates will be much lower a year from now.

The market consensus expects August nonfarm payrolls to remain below 100k and unemployment rate to rise to 4.3% from July’s 4.2% for the first time since Oct 2021. Mirroring the nonfarm payrolls, US JOLTS job openings fell to 7181k in July, lower than the 7380k consensus. June was revised lower to 7357k from 7437k. The labour market’s softness was also reflected in the Fed’s Beige Book which reported little to no change in economic activity across most of the 12 Fed districts. Business contacts reported raising prices to partially offset the impactful tariff-related price increases in inputs. Many households felt the pinch of wages as these did not keep up with rising prices, implying weaker consumer spending and lower growth expectations. Hiring slowed with businesses hesitant to fill in vacancies or bring in new staff with some turning to automation and AI instead.

On the inflation front, the market consensus projects US CPI to reach 0.3% m/m in August from July’s 0.2%. This figure is particularly crucial as it will be the final data point before the Fed’s September meeting. Moreover, the US Court of Appeals for the Federal Circuit voted 7-4 on 29 Aug to uphold a lower court ruling that US President Donald Trump does not have the authority to impose sweeping reciprocal tariffs under the International Emergency Economic Powers Act (IEEPA). However, the court allowed the tariffs to stay in effect until at least 14 Oct to give the Trump administration time to appeal the decision to the Supreme Court.

Shifting to Europe, the ECB's rate decision will be held on 11 Sep, following the Eurozone’s headline inflation reaching 2.1% y/y in August—within the ECB's target range, albeit up from July's 2%. The market will also monitor political developments in France after Prime Minister Bayrou's confidence vote on 8 Sep.


Download the PDF to read the full report which includes coverage on Credit, FX, Rates, and Thematics.

Disclaimers and Important Notices

The information published by DBS Bank Ltd. (company registration no.: 196800306E) (“DBS”) is for information only. It is based on information or opinions obtained from sources believed to be reliable (but which have not been independently verified by DBS, its related companies and affiliates (“DBS Group”)) and to the maximum extent permitted by law, DBS Group does not make any representation or warranty (express or implied) as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions and estimates are subject to change without notice. The publication and distribution of the information does not constitute nor does it imply any form of endorsement by DBS Group of any person, entity, services or products described or appearing in the information. Any past performance, projection, forecast or simulation of results is not necessarily indicative of the future or likely performance of any investment or securities. Foreign exchange transactions involve risks. You should note that fluctuations in foreign exchange rates may result in losses. You may wish to seek your own independent financial, tax, or legal advice or make such independent investigations as you consider necessary or appropriate.

The information published is not and does not constitute or form part of any offer, recommendation, invitation or solicitation to subscribe to or to enter into any transaction; nor is it calculated to invite, nor does it permit the making of offers to the public to subscribe to or enter into any transaction in any jurisdiction or country in which such offer, recommendation, invitation or solicitation is not authorised or to any person to whom it is unlawful to make such offer, recommendation, invitation or solicitation or where such offer, recommendation, invitation or solicitation would be contrary to law or regulation or which would subject DBS Group to any registration requirement within such jurisdiction or country, and should not be viewed as such. Without prejudice to the generality of the foregoing, the information, services or products described or appearing in the information are not specifically intended for or specifically targeted at the public in any specific jurisdiction.

The information is the property of DBS and is protected by applicable intellectual property laws. No reproduction, transmission, sale, distribution, publication, broadcast, circulation, modification, dissemination, or commercial exploitation such information in any manner (including electronic, print or other media now known or hereafter developed) is permitted.

DBS Group and its respective directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned and may also perform or seek to perform broking, investment banking and other banking or financial services to any persons or entities mentioned.

To the maximum extent permitted by law, DBS Group accepts no liability for any losses or damages (including direct, special, indirect, consequential, incidental or loss of profits) of any kind arising from or in connection with any reliance and/or use of the information (including any error, omission or misstatement, negligent or otherwise) or further communication, even if DBS Group has been advised of the possibility thereof.

The information is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. The information is distributed (a) in Singapore, by DBS Bank Ltd.; (b) in China, by DBS Bank (China) Ltd; (c) in Hong Kong, by DBS Bank (Hong Kong) Limited; (d) in Taiwan, by DBS Bank (Taiwan) Ltd; (e) in Indonesia, by PT DBS Indonesia; and (f) in India, by DBS Bank Ltd, Mumbai Branch.