The Weekly Briefing from Capital Economics

The Fed is trying to calibrate policy in the midst of a government shutdown that’s effectively cut off the flow of data. Jerome Powell says that when you’re driving in fog, you should slow down – but there’s still a case for the FOMC to follow this past week’s rate cut with another move in December, says Deputy Chief North America Economist Stephen Brown. He talks to David Wilder about why the state of the US economy argues for another cut this year, but fewer in 2026 than markets currently expect.That Fed meeting wasn’t the week’s only big event. In Korea, Donald Trump held the first face-to-face meeting of his second term with Xi Jinping. The one-year truce resulting from that meeting has eased near-term US-China trade tensions, but much could still go wrong, warns China Economist Leah Fahy. She discusses what might plunge bilateral relations back into crisis, the health of China’s economy, and why – even if Washington clears Chinese firms to buy cutting-edge AI chips – they may not do so.Analysis and events referenced in this episode:Drop-In: The Fed, ECB and Bank of England – Latest decisions and policy outlookCapital Economics EventsRead: Fed cuts and ends QT, but further loosening not guaranteedRead: Bank of Canada cuts but thinks it has done enoughXi-Trump talks buy China time to decouple at its own paceThe economic and market impact of AI

Out of the darkness of a shuttered US government comes a rare data release – and it’s a CPI report that’s given markets some relief as the week draws to a close. But does September’s inflation data really clear the way for Fed rate cuts in December as well as October, as investors now expect?In this week’s episode of The Weekly Briefing from Capital Economics, Group Chief Economist Neil Shearing explains why the Fed is likely to stay cautious, previews key upcoming central bank meetings, and looks ahead to next week’s much-anticipated Donald Trump-Xi Jinping summit in South Korea.Also on the show, the US Treasury’s new sanctions on Russia’s two biggest oil exporters have brought a key risk to our below-consensus oil price forecasts to the fore. Chief Climate and Commodities Economist David Oxley discusses how much this move could shake up the outlook – and whether Trump will actually follow through with full enforcement.Analysis and events referenced in this episode:Read: China ramping up use of export controlsDrop-In: Argentina’s mid-term elections – A referendum on Milei’s reformsDrop-In: The Fed, ECB and Bank of England – Latest decisions and policy outlook

In just a few days, US–China relations have taken a troubling turn. How did we go from the goodwill of the London and Madrid bilaterals to the current war of words, the threats and the counter-threats? Is this simply pre-APEC brinkmanship, or the start of a more fundamental breakdown in relations between Washington and Beijing? And how great are the risks of a miscalculation that spills over into the global economy? In this special episode of The Weekly Briefing from Capital Economics, Group Chief Economist Neil Shearing and Head of China Economics Julian Evans-Pritchard discuss the past, present and future of US–China relations. They explore key questions, including:• What’s driving Beijing’s new controls on rare earths, and whether the government could reverse course• What’s wrong with US perceptions of China’s economic health – and why those perceptions could prove dangerous • How the global economy will need to keep adjusting to a fracturing US-China relationshipAnalysis referenced in this episodeThe fracturing of the Global EconomyUS may revive plans to curb financial ties with ChinaGlobal Economics Outlook: US leads, others lag, in uneven global economyCAP: Economy holding up, but growth remains weakChina’s push for innovation is not lifting productivity

How reliant is the US economy on the AI investment boom? It’s a question Group Chief Economist Neil Shearing keeps getting in client meetings. On this episode of The Weekly Briefing, he tells David Wilder why there’s more to the story than hype around a new technology. Neil also explains why France faces a political – but not an economic – crisis, and what to make of China’s toughest moves yet to control rare earth exports.Also on the show, six months after Liberation Day, Deputy Chief Markets Economist Jonas Goltermann assesses how predictions of the dollar’s demise have played out and unpacks the market’s striking response to Japan’s new LDP leader.Analysis and events referenced in this episode:Watch: US Outlook – Weighing the AI boom, labour constraints and the Fed’s next chapterRead: China tightens its grip on rare earths (again)Register: Markets Drop-In: Asset Allocation in 2026 – Why we don’t think the AI equities boom is overRead: Japan coalition talksRead: What would PM Takaichi mean for Japan?

Our new Global Economic Outlook has just been published – and it makes for a striking contrast. In the US, the drag from Trump’s policy agenda looks set to be outweighed by an AI-driven investment boom that may already be lifting productivity. In Europe, by contrast, the optimism seen earlier this year has faded as structural headwinds continue to hold growth back.In this episode of The Weekly Briefing, Group Chief Economist Neil Shearing explores how AI may be transforming America’s potential, even as Europe struggles with long-standing weaknesses.Plus, a decade on from a devastating market crash, Asia-Pacific Markets head Thomas Mathews unpacks what’s been driving China’s equity boom this year – despite the broader economic weakness – and how sustainable it really is.Analysis and events referenced in this episodeGlobal Economic Outlook: US leads, others lag, in uneven global economyDrop-In: US Outlook – Weighing the AI boom, labour constraints and the Fed’s next chapterDrop-In: China Outlook – Can policy reverse economic weakness?The economic and market impact of AIMore upside for China’s stock market as its AI+ plan gets going

Tariffs are back in the headlines after Donald Trump’s latest announcements – but how much of a threat do these new levies really pose? Could they fuel inflation pressures, and is Trump’s trade policy really bringing manufacturing jobs back?Neil Shearing joins David Wilder to assess Trump’s tariff threats, explain why Stephen Miran’s call for US rates to be halved doesn’t add up, and examine what’s driving the divergence between inflation in the US and Europe/UK.Also on the show, Latin America Economist Kimberley Sperrfechter looks at an extraordinary week in Argentina, where markets have steadied after Washington intervened. What drove the Trump administration to act so forcefully, and will the support work?Analysis and events referenced in this episode:Data: Tariff Impact ModelRead: US Tariff AnnouncementRead: Japanese manufacturers starting to shift production to USRead: Euro-zone inflation risks now to the downsideDrop-In: From bonds to equities – The great pensions switch and its risksDrop-In: Where is r* heading? Catching up on equilibrium real ratesDrop-In: UK Outlook – More tax rises to add to economy’s woes​​Read: Mapping China’s presence in Latin America​

There’s plenty of talk about a possible settlement in US-China relations, but Group Chief Economist Neil Shearing urges caution. Ahead of a call between Donald Trump and Xi Jinping, he spoke with David Wilder about how a deal might be struck – and why it would fall short of easing the deeper tensions driving the fracturing of the global economy.Also on the show, with crime rising in Latin American countries once seen as relatively safe, Chief Emerging Markets Economist William Jackson discusses its economic costs and influence on upcoming elections.Plus, in an exclusive clip from our central bank Drop-In briefing, we look at how the Fed’s latest rate projections compare with ours, and why the Bank of England is growing more sensitive to inflation risks.Analysis and events referenced in this episode:Event: Fracturing in the Age of Trump - New York October 2025Read: China's Nvidia ban signals strong push for chip self-sufficiencyRead: Counting the cost of crime in Latin AmericaLatAm Outlook: Slowdown sets the stage for dovish surprisesWatch: Central Bank Drop-In - Unpacking the Fed, ECB and Bank of England September meetings

The Fed meets this coming week to decide how much monetary relief the US economy really needs. Group Chief Economist Neil Shearing says that, employment data aside, the evidence argues for fewer rate cuts than markets are pricing in. He talks to David Wilder about the health of the economy, whether the surge in AI investment is making a difference, and previews the Bank of England meeting, where the pace of quantitative tightening may be slowed by a still-febrile bond market. Also on the show, Chief Climate and Commodities Economist David Oxley assesses the oil price outlook in light of the week's geopolitical developments in Qatar and Poland, and ahead of OPEC’s 65th anniversary.Analysis and events referenced in this episodeUS economy is doing better than weak payrolls suggestNo more BoE cuts this year, but rates to fall to 3.00% next yearLabour market slump to prompt BoC to resume cutsWeak labour demand forces Fed off the sidelinesThe economic and market impact of AIData: GDP NowcastsOPEC at 65: shifting market dynamics expose frailties

Group Chief Economist Neil Shearing tackles that weak US August Employment report, previews the coming week’s inflation data, talks about what’s been happening in the bond market and explains just what recent get-togethers in China signal about a new world order.Also on the show, ahead of a crunch vote for France’s government, Chief Europe Economist Andrew Kenningham talks about why the French political establishment is struggling to break out of its fiscal logjam, and what this all means for the outlook for the government bond market. Analysis and events referenced in this episode:Read: French borrowing costs may soon exceed Italy’sDrop-In: France’s political turmoil and the fragility of global bond marketsDrop-In: What’s really holding up the commercial real estate recovery?Fracturing in the Age of Trump - London September 2025Fracturing in the Age of Trump - New York October 2025

What tensions will yet erupt as the US–China economic relationship unravels? What will the global economy look like in 2040? And what should business and government leaders be doing now to adapt to an era of economic fracturing?The Fractured Age: How the Return of Geopolitics Will Splinter the Global Economy is published on 28 August. In this special episode, author and Group Chief Economist Neil Shearing joins David Wilder to unpack the book’s key lessons and to show how today’s headlines reveal the deeper forces driving economic fracturing. Explore Capital Economics' data and analysis on global economic fracturing and sign up for our fracturing events this September/October:Singapore (3rd Sept)Hong Kong (4th Sept)London (17th Sept)New York (9th Oct)