Major global stock markets surged on Thursday, September 12, 2025, reaching new peaks as the latest US inflation data aligned with forecasts, bolstering expectations for an imminent interest rate cut by the Federal Reserve. Meanwhile, the European Central Bank maintained its current interest rate policy, signaling a cautious but steady approach to monetary management amidst evolving economic landscapes.
US Inflation Aligns With Forecasts, Bolstering Fed Rate Cut Hopes
Wall Street concluded Thursday’s trading session with major indices posting significant gains, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all achieving record closes. This upward momentum was largely driven by the release of the US Consumer Price Index (CPI) for August. The Labor Department reported that the CPI rose by 0.4% on a seasonally adjusted basis for the month, bringing the annual inflation rate to 2.9%. This figure met economists’ expectations, reinforcing the view that inflationary pressures, while present, are not accelerating at a pace that would derail the Federal Reserve’s anticipated monetary easing.
Core inflation, which excludes volatile food and energy prices, also rose in line with projections, increasing by 0.3% monthly and 3.1% annually. While some analysts noted that certain goods prices, influenced by recent tariffs, contributed to the uptick, the overall data was interpreted as sufficiently moderate to support a Federal Reserve pivot. This reading has strengthened the conviction among market participants that the Fed will proceed with a rate cut at its upcoming Federal Open Market Committee (FOMC) meeting scheduled for September 16-17. Market indicators suggest a high probability, well over 80%, of a 25-basis-point reduction in the federal funds rate, with further cuts anticipated later in the year and into 2026.
Labor Market Weakness Adds to Easing Case
Adding further weight to the argument for monetary easing, recent labor market data painted a picture of a cooling economy. The August jobs report revealed a sluggish hiring pace, with only 22,000 new jobs added. This was accompanied by a sharp increase in initial jobless claims. In the week ending September 6, applications for unemployment benefits surged by 27,000 to reach 263,000, the highest level observed in nearly four years, significantly exceeding economist forecasts. While continuing claims remained stable, the rising trend in initial claims signals potential layoff activity and a softening labor market, which central bankers monitor closely for signs of economic deceleration.
ECB Holds Rates Steady, Revises Growth Forecasts Upward
Across the Atlantic, the European Central Bank (ECB) convened on Thursday and announced its decision to keep its key interest rates unchanged for the second consecutive meeting. The benchmark deposit facility rate remains at 2.00%, with the main refinancing operations rate at 2.15% and the marginal lending facility rate at 2.40%. The ECB cited that inflation is currently hovering around its medium-term target of 2%. The central bank also updated its economic projections, revising the eurozone’s growth forecast for 2025 upward to 1.2%, from a previous estimate of 0.9%. Inflation projections for the year were maintained at 2.1%. Despite the steady policy, ECB President Christine Lagarde’s remarks during the press conference were perceived by some as hawkish, suggesting that the disinflationary process might be concluding. This stance tempered initial market enthusiasm for further aggressive easing from the ECB.
Oil Markets Brace for Surplus Amid Record Supply
In commodity markets, oil prices experienced a decline on Thursday. This downturn was attributed to a robust global crude supply that is currently offsetting geopolitical tensions. The International Energy Agency (IEA) reported that global oil supply reached a record high of 106.9 million barrels per day in August. Production increases from OPEC+ members and non-OPEC+ nations, including the United States, Brazil, and Canada, have contributed to this surge. The IEA forecasts a growing surplus in the oil market by 2026, suggesting that supply growth is outpacing demand. This ample supply has kept prices in check, with Brent crude futures trading around $66.36 per barrel and U.S. West Texas Intermediate (WTI) crude futures near $62.51.
Business Sentiment and Outlook
The confluence of expected monetary easing in the US, a steady hand from the ECB, and a well-supplied oil market contributed to a generally positive sentiment across global financial markets. Major Asian exchanges, including Tokyo, also saw gains, with Alibaba showing significant upward movement amid news of major AI investments. However, lingering concerns remain regarding the potential inflationary impacts of US tariffs and political pressures on central bank independence. As markets digest these developments, the focus shifts to upcoming economic data and central bank communications for further direction, highlighting a delicate balance between sustaining growth and anchoring inflation expectations. This news cycle underscores the dynamic interplay of economic indicators shaping the business environment.
