What to expect at a first 'get-to-know-you' meeting

• With energy prices under control and declining wage growth, inflation rates are continuing to fall almost everywhere. Inflation in the euro area is already within the central banks' 'comfort zone'. In the US, however, core inflation remains somewhat higher and the rising import duties are having a noticeable effect on output prices. 
• With a number of key trade agreements in place, the new average import tariff is estimated at 16-17% (compared to 2.5% before Trump II). These levies are expected to gradually trickle down into retail prices in the coming months, keeping inflation above the Federal Reserve's target for several more months.

• The 'Big Beautiful Bill', which mainly extends the expiring tax cuts from Trump's previous tenure, is expected to provide a limited boost to growth. However, there will be little change in the high budget deficit, which will further derail US public finances in the coming years. China continues to regularly support its flagging economy with new policy measures. In the euro area, the major investments announced for defence and infrastructure are gradually taking more concrete shape, although it looks as if their impact won’t be felt fully until 2026-27.
• The ECB kept its deposit rate unchanged at 2% in July, with further movements dependent on economic data. The Fed recently reaffirmed its pause in interest rate cuts, as growth remains reasonable and uncertainty around inflation remains. The market is still counting on another rate cut in September and more cuts thereafter.

• Despite weaker growth, falling inflation and lower key rates, bond yields remain at somewhat higher levels in both the US and Europe. Uncertainty about the impact higher import tariffs will have on inflation and the related timing of further interest rate cuts by the Federal Reserve explain this trend in the US, as does the lack of attention for public finances which are running out of control. 
• The fiscal about-turn by the new German government, lifting the ‘debt brake’ and allocating a generous budget to relaunch policy and defence spending, explains the higher yields in Europe.

• Stock markets have climbed again to new historic highs in recent weeks, driven mainly by the absence of escalation in the trade war and a favourable start to the second-quarter reporting season. 
• The US is heading for better-than-expected earnings growth of 7.5%, driven by IT and financial stocks. In Europe, the banks produced strong numbers. 
• Cyclical companies, by contrast, sounded much less positive and many of them issued profit warnings. We may again see no earnings growth in the second quarter, and the expected growth for the full-year 2025 has been lowered further and points to another decline (-2.5%)

• The conflicts in the Middle East and Ukraine have remained somewhat on the back burner on the financial markets in recent weeks, but there is nothing to exclude them flaring up again.