Daily Economic Update

US: Trump asks Fed Governor Lisa Cook to resign; FOMC members saw inflation as greater risk in their July meeting. President Trump, through a social media post, called on Fed governor Lisa Cook to resign following an allegation by Federal Housing Finance Agency Director Bill Pulte of irregularities in her mortgage applications. If the administration is successful in removing her or in pressuring her to step down, Trump would have another opportunity to fill the vacancy with someone willing to toe the line, further undermining the credibility of the world’s most impactful monetary policy institution. Meanwhile, meeting minutes from the FOMC July meeting, at which the bank kept the policy rate unchanged in the 4.25-4.5% range for the fifth time, showed that a majority of participants judged that increasing inflation was a greater risk than weakening employment, driving an overall cautious stance. However, since the meeting, the US labor market has shown more signs of weakening, yet inflation concerns have remained present following July’s CPI and PPI prints. Although the market is continuing to price in a 25-bps interest rate cut next month, Powell’s Jackson Hole speech tomorrow, inflation prints (August CPI and July PCE) as well as August’s employment report are key matters that the FOMC will closely take into account before its 16-17 September meeting.

UK: CPI inflation rises to 3.8% led by transportation costs, jeopardizing BoE bank rate cut hopes. CPI inflation in July rose to its highest level since January 2024 at 3.8% y/y from 3.6% in June, above the street forecast but in line with the BoE’s projection, with the core rate also accelerating to 3.8% from 3.7% earlier. While goods prices continued to rise at a faster rate (2.7% versus 2.4% in June), services inflation also increased, to a three-month high of 5.0% from 4.7% in June, above the BoE’s forecast of 4.9%. The rise in inflation was mainly driven by sharp jumps in transportation (airfare and fuel prices) and hotel accommodation costs, which the ONS partly attributed to a shift in the timing of school summer holidays. On a monthly basis, headline and core prices rose by 0.1% and 0.2%, respectively. Despite overall inflation being in line with the BoE expectations, we think the uptick in services prices, typically stickier, should drive extra caution amongst MPC members after they narrowly voted (5 to 4) for a 25 bps interest rate cut earlier this month. The futures market also trimmed the likelihood of another 25 bps rate cut this year to around 40%. 

Japan: Composite PMI improves in August on factory output and solid gains in services activity. The flash estimate for the S&P Global Composite PMI rose in August to 51.9, up from 51.6 in July, its fastest increase since February, and extending the expansion in the private sector activity for a fifth straight month. The Manufacturing PMI, however, remained in contractionary territory at 49.9, but this was at least an improvement on the 48.9 recorded in July on a marginal increase in production. Foreign demand dropped for the fifth consecutive month due to the impact of the new US tariffs. On the other hand, the services PMI continued to expand, for a fifth consecutive month, albeit at a less rapid pace, as it slipped to 52.7 from 53.6 in July. On the prices front, average input prices saw a sharp acceleration in August with on increases in the price of raw materials, labor and transportation while output price growth slowed to its lowest level since October 2024 due to higher competition. Business sentiment for the year ahead ticked up but remained below the long-run average.

Chart 1: UK policy interest rate and inflation (%) Source: Haver

Egypt: CBE net foreign assets up to $10.5 billion at end-July.  The Central Bank of Egypt (CBE) revealed that its net foreign assets (NFAs) rose by $400 million to approximately $10.5 billion by the end of July. The NFAs for the CBE are one of the most important measures of banking stability and resilience. The NFAs for the CBE and the unofficial reserves work as a buffer against any immediate obligations that should be paid. Securities and deposits not included in the official definition reached $12.6 billion in July. These figures, in addition to the $49 billion in official reserves – an all-time high – comfortably exceed the IMF’s reserves adequacy metric for emerging markets. 

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