The ongoing culling (both planned and implemented) of the federal workforce totals 216k positions thus far with another 75k accepting voluntary buyout offers This puts more workers into what is already a finely balanced U.S. labor market. The U.S. Federal Government employs 2.4 million workers (excluding U.S. postal service) accounting for 1.9% of the entire U.S. civilian workforce. The Trump administration expects 300k federal employee reduction by year-end amounting to 12.5% of the federal workface ex. postal service. Earlier, Judge Susan Illston has issued preliminary injunction that pauses further reductions in force of the federal government. The Trump administration has successfully appealed this decision in the Supreme Court.
Japan and EU has since successfully negotiated trade agreements with the U.S. A 15% tariff on goods exports are applied to EU and Japan in exchange for binding energy purchases and investments. Certain goods categories may see lower or higher tariffs subject to further negotiations. A 30% baseline is applied to China down from 145% earlier. Indian faces a massive 50% tariffs as Trump zeroes in on Russian energy purchase. Two of the largest U.S. trading partners Mexico and Canada are hit with 25% and 35% tariffs, respectively on goods outside of the USMCA. Negotiations are still ongoing.
After eight consecutive rate cuts, the ECB held rates unchanged at the latest July meeting. The ECB earlier downgraded GDP growth outlook to 0.9% for CY25 and projects slightly lower GDP growth for CY26 at 1.1%. The ECB’s asset purchase program (APP) and pandemic emergency purchase program (PEPP) no longer reinvests principal payments from maturing securities. The ECB is embarking on aggressive easing pivot to bolster meager economic growth amid challenged external demand.
The BOE voted 5–4 to slash interest rate by 25bps to 4% after an initial vote was split. This marked the third rate cut in 2025 after BOE slashed policy rate by 25bps each in February and May. The door for one additional rate cut remains open should inflationary pressures prove transitory. July’s headline and core CPI rose 3.8%YoY driven by food and various services category such as household services and education. The BOE expects inflation to moderate further due to tepid demand. Earlier in May, the BOE downgraded 2025 GDP growth forecast from 1.5% to 1%.
The BOJ voted 8-1 to hike policy rate by 25bps to 0.5% in January to a 17-year high and has held rate steady since. The BOJ now sees core CPI between 2.8% and 3.0% in 2025, higher than its prior forecast of 2.2% and 2.4%. Inflation has persistently hovered above the 2% BOJ’s target. Market sees BOJ hiking once more in 2025. The BOJ slightly raised 2025 GDP forecast to a range of 0.5% to 0.7% from 0.4% to 0.6%. China’s economy continues to expand faster than the 5% official target. GDP expanded by a stronger than expanded 5.4%YoY in Q1CY25 followed by 5.2% in Q2CY25.
India’s GDP slowed to 6.5% in FY24 due mainly to the contraction in government spending after a robust 8.2% growth in 2023. India’s benchmark equity index, remains 4% below all-time-high. After slashing policy rate by a cumulative 100bps since the start of 2025 the RBI held policy rate steady at the latest meeting. A projected rise government spending, moderating inflation and tax relief has sparked optimism and with real interest rate as high as 4% the RBI has plenty of room to maneuver policy rate lower. The RBI predicts 6.5% GDP growth for FY25.
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