However, core CPI was softer at 0.2% month-on-month. The US Fed’s preferred inflation measure, core PCE, rose to 2.8%, marking the second consecutive monthly increase and remaining above the central bank’s 2.0% target. In the UK, headline CPI rose to 3.6% year-on-year, driven by transport costs, while core CPI increased to 3.7%. Services inflation remained unchanged at 4.7%.

Central banks remained cautious. The US Federal Reserve held rates steady for the fifth consecutive meeting, maintaining the benchmark range at 4.25%–4.5%. Notably, two governors dissented, marking a rare split. The Bank of Japan kept its policy rate unchanged at 0.5%, but revised inflation forecasts upward due to rising food costs and stronger wage growth. In Europe, the ECB paused its rate-cutting cycle, holding its benchmark rate at 2.0%, citing stabilised inflation and slowing wage growth.

Globally, economic signals were mixed. In the US, GDP rebounded in Q2 2025, growing 3.0% year-on-year after a 0.5% contraction in Q1 – the first decline in three years. The rebound was largely driven by a sharp drop in imports, reversing a surge in Q1 as businesses and consumers stockpiled ahead of anticipated tariffs. Consumer spending supported growth, while fixed investment weakened. China’s GDP grew 5.2%, supported by strong exports despite trade tensions, though domestic demand and property sector weakness continued to drag. Producer prices in China fell 3.6% year-on-year, the steepest decline in nearly two years. The IMF has revised its global GDP growth forecast for 2025 to 3.0%, up from its April projection, citing improved economic conditions.

Bond markets reflected shifting expectations. 30-year US Treasury yields rose above 5% as markets digested the higher inflation figures and the fiscal implications of OBBBA. Japan’s 30-year bond yields also climbed above 3%, reflecting similar concerns around inflation and policy normalisation. The Bloomberg Global Aggregate Bond Index declined 1.5% for the month, as rising yields weighed on fixed income performance. Meanwhile, the US Dollar Index, which measures the dollar’s performance against a basket of major currencies, strengthened 3.2% in July, driven by dollar demand as new trade agreements came into effect.

The MSCI All Country World Index rose 1.4%, with emerging markets outperforming developed markets. The MSCI EM Index returned 2.0%, while Japan’s Nikkei declined 2.6% in July. In Europe, performance was mixed, UK’s FTSE 100 led with a 0.7% USD return, while Germany’s DAX declined 1.9% and France’s CAC 40 declined 1.1%.

Commodities saw mixed performance. Brent crude oil rose by 7.3% in July 2025, despite OPEC+’s announcement of a planned production increase. Gold declined 0.4% amid dollar strength but remains up 25.4% year-to-date. Among PGMs, platinum fell 5.0% in July, palladium rose 8.3%, and rhodium surged 32.4%. Copper initially rallied on supply concerns and tariff fears but dropped 18% after the US announced a 50% tariff limited to semi-finished products, triggering a sharp correction. Copper ended the month down 2.6%.

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