Monthly interview Patrick Müller & Klaus W. Wellershoff

Uncertainty? Not at all – the financial markets are moving in only one direction in August. Almost all stock markets have risen by several percentage points, and prices for bonds, gold and real estate have also risen slightly. Although economic conditions have deteriorated somewhat over the same period, they have turned out to be less bad than feared. This seems to be reason enough for the financial market to take a more optimistic view of the future again.

The video is from 2 September 2025

Economic growth: The economy is slowing down somewhat more

Global economic momentum remains subdued and is likely to stay that way for the time being in view of the US tariffs that have been imposed.

In the US, the pace of expansion slowed significantly in the first half of the year, accompanied by a weakening labour market, which is causing increasing concern about economic resilience. Political interference in institutions is also causing uncertainty, as exemplified by the dismissal of the head of the Labour Institute and the attacks on the composition of the Fed.

China is continuing its months-long course of subdued momentum. Neither investment, industrial production nor retail sales are showing signs of a sustained upturn. In Europe, too, economic sentiment remains sluggish, even though industrial sentiment benefited slightly from the recent tariff deal. Overall, there is a lack of impetus for a broader revival of growth, meaning that global economic expansion currently appears fragile.

Inflation: Inflationary trends are becoming more apparent again

The inflation situation in industrialised countries remains heterogeneous. In the United Kingdom, there was a controversial interest rate cut despite persistently high inflation. Shortly afterwards, the core rate rose unexpectedly from an already high 3.7 per cent to 3.9 per cent. In the United States, too, there has been a renewed rise in core inflation.

In Japan, the rise in the core rate has come to a halt for the time being. It is stagnating at a high 3.4 per cent, while the overall rate has fallen to 3.1 per cent.

In Europe, on the other hand, inflation has reached the target range: the overall rate in the eurozone is 2 per cent, with the core rate slightly higher at 2.3 per cent. For Switzerland, the situation has stabilised for the time being against the backdrop of a slight rise in inflation, but the SNB's room for manoeuvre remains limited.

Monetary policy: Central banks remain restrictive, but are adjusting their rhetoric to political circumstances

Several central banks in industrialised nations continue to be caught between a weakening economy and persistent inflation. However, there are signs of a growing shift in priorities towards supporting the economy. This is particularly evident in the United States, where the Federal Reserve is adopting a more cautious stance, as well as in the United Kingdom. Although the core inflation rate there remains well above the target range at 3.1 per cent, the financial markets expect key interest rates to be cut in the near future. The Fed has so far refrained from cutting rates due to the tense inflation situation, but its tone has become noticeably softer.

The Swiss National Bank (SNB), on the other hand, is not struggling with inflation. However, the fragile economic situation is likely to bring back the risk of deflation, which would leave the SNB with little room for manoeuvre as the key interest rate is already at 0 per cent.