Year · Market review
Year: inflation and energy changed the path of interest rates
From 2 October 2025 to 1 October 2026, US rate cuts gave way to a pause and then a September increase. Energy supply disruption and changing tariffs affected business costs, while artificial-intelligence equipment suppliers grew their profits. The latest information adds to that chronology: US spending remains resilient, but higher market interest rates and fuel costs make expansion harder for some businesses.
Period covered: 2025-10-02 – 2026-10-01Information as of 18 min read
The 30 September releases included US spending and revised growth data, preliminary German and French inflation, and China’s factory survey. Long-term US Treasury yields ended the month above their August levels.
The US and euro-area policy rate increases made in September remain in effect. Strong sales can support company profits, but energy and new borrowing costs can absorb part of those profits.
Year
What happened
Autumn 2025: US interest rates fell while Europe opted for a pause
Before this rolling period began, on 17 September 2025, the Federal Reserve cut its target range from 4.25–4.50% to 4.00–4.25%. That is the starting background before the period beginning on 2 October 2025. It cut the range by another quarter point on both 29 October and 10 December, reaching 3.50–3.75%. Each decision took effect the following day.
Lower interest rates helped some borrowers, but their benefits cannot be separated from the reason for the cuts. If a central bank cuts rates because it sees weaker demand, a company’s cheaper loan may be offset by poorer sales. That is why the simple rule that “rates were cut, so that is good for shares” does not explain the market’s entire reaction.
During the autumn, the European Central Bank kept the rate paid on banks’ overnight deposits at 2.00%. Its 11 September decision was announced before this rolling twelve-month period began, but established its starting backdrop. The rate remained unchanged at the October and December meetings. The US and the euro area were therefore already following different paths.
November: the US and China agreed to ease some tariffs and export restrictions
On 1 November 2025, the US announced the terms of an agreement with China. The US committed to reducing the cumulative fentanyl-related tariff on Chinese goods by 10 percentage points from 10 November. China committed to suspending new rare-earth export controls announced on 9 October. These materials are used in industrial and technological equipment, so supply conditions matter to more than just their producers.
However, temporary relief is not a permanent, unchanging rule. A factory needs to know when a component will arrive and what its final cost will be. Uncertainty encourages companies to hold larger inventories or seek a more expensive alternative supplier. The November decision therefore cannot automatically be presented as the tariff applying to all goods today: subsequent measures have their own legal bases and conditions.
December: the UK cut interest rates while Japan raised them
On 18 December 2025, the Bank of England announced a 0.25 percentage point cut in Bank Rate to 3.75%. The next day, the Bank of Japan announced an increase in its overnight interest-rate target from 0.50% to 0.75%, effective from 22 December. UK borrowers gained the prospect of cheaper credit, while conditions for new borrowing and debt refinancing tightened in Japan.
January 2026: switching energy suppliers became a concrete plan
On 26 January, the Council of the European Union approved a gradual phase-out of Russian gas imports. A full ban on liquefied natural gas is scheduled from the beginning of 2027, and on pipeline gas from autumn 2027. These are future deadlines with transition periods, not a halt to all imports on that January date.
Replacing Russian gas required new supply contracts and infrastructure. Other suppliers, ships, terminals and reserves were needed. Over time, a wider choice of suppliers may reduce dependence, but the transition itself also costs money. Investors need to distinguish the long-term benefits of resilience from the near-term bills for energy and infrastructure.
Meanwhile, the US central bank was in no hurry to continue the autumn cuts. The 3.50–3.75% range remained unchanged at its January, March and April meetings. Europe’s February, March and April decisions also maintained the 2.00% deposit facility rate. Earlier cuts were not a promise that every subsequent meeting would follow the same pattern.
February: the legal basis for tariffs changed
On 20 February, the US Supreme Court ruled that the International Emergency Economic Powers Act does not authorise the president to impose tariffs. The decision restricted a specific legal basis. It did not mean that all US import tariffs disappeared, because other measures relied on different laws.
On the same day, the administration announced a temporary 10% import surcharge, with exemptions, under a different section of the Trade Act. The proclamation specified a start on 24 February and a 150-day period until 24 July. This is a historical measure, not a tariff automatically applying to all imports today.
For businesses, changes like these mean having to recheck a product’s origin, classification code, delivery date and exemptions. An importer uncertain of the final cost may delay an order or hold more inventory. Even a politically favourable headline therefore does not always immediately reduce a company’s costs or increase its sales.
February's results showed that technology demand was more than a promise
On 25 February, chip designer NVIDIA reported results for its financial year ended 25 January. Revenue reached $215.938 billion, while net income under US accounting standards was $120.067 billion. Both figures were 65% higher than in the company’s previous financial year. These are results for a completed period, not a forecast for calendar year 2026.
This matters to the longer story: technology suppliers were generating visible, actual earnings well before the summer results season. But profit does not answer the question of an investment’s price. Even a successful company may be valued on very high expectations for the future that subsequently prove harder to meet.
Spring: geopolitical risk became an oil delivery problem
The war in the Middle East that began on 28 February disrupted oil shipments through the Strait of Hormuz. On 11 March, International Energy Agency member countries agreed to make 400 million barrels of emergency oil reserves available to the market. This was the largest coordinated release amount in the agency’s history. The decision was a commitment to release reserves, not the release of the entire volume in one day.
Reserves can buy time, but cannot replace commercial supply indefinitely. When reliable deliveries are lacking, the effects spread from the oil market to fuel, transport, chemicals and household purchasing power. More expensive energy can simultaneously raise inflation and weaken growth. A central bank faces an uncomfortable choice: raising interest rates does not produce additional oil, but cutting them may stimulate demand at a time when supply is constrained.
May: the EU–Mercosur agreement reduced some tariffs
On 1 May 2026, provisional application began for the European Union’s trade agreement with Argentina, Brazil, Paraguay and Uruguay, the Mercosur countries. Initial tariff reductions took effect for products including cars, pharmaceuticals and some food and drink, such as wine and olive oil. These were applicable trading terms, but not yet the fully ratified partnership agreement.
European exporters gained opportunities to reach buyers on more favourable terms. For importers, a wider choice may help reduce dependence on a single supplier. At the same time, greater competition puts pressure on more vulnerable sectors. Actual orders and the use of trade preferences ultimately reveal the investment significance, not just the headline on the day an agreement is signed or takes effect.
June and July: Europe's interest rate direction reversed
On 11 June, the European Central Bank announced a 0.25 percentage point rate increase. The deposit facility rate rose to 2.25% from 17 June. It was left unchanged on 23 July. The US maintained its 3.50–3.75% target range at the 17 June and 29 July meetings. US cuts had therefore given way to a pause, while Europe had already turned towards higher rates.
On 16 June 2026, the Bank of Japan decided to raise its overnight interest-rate target again, from 0.75% to 1.00%, effective from 17 June. It left that target unchanged on 31 July. Borrowing in Japan was therefore becoming more expensive before the September decision, affecting Japanese bonds and investments financed with borrowed yen.
The 18 June memorandum between the US and Iran raised hopes of normalising supply. But the International Energy Agency’s 10 July report already described ceasefire breaches on 7–8 July. Its August edition showed weaker oil export flows in July. An agreement and its implementation proved to be two separate stages that matter to investors.
On 23 July, the European Union expanded energy and financial sanctions against Russia. On the same day, the Office of the US Trade Representative announced tariff measures on imports from 60 economies, including the European Union, over insufficient bans on imports of goods made with forced labour. Tariffs depended on products and exemptions; this was not an extension of February’s temporary surcharge. Importers had to check both supply availability and the tariff applying to each product.
Summer: NVIDIA’s profits grew while its customers invested heavily in infrastructure
On 26 August, NVIDIA reported revenue of $96.221 billion for the quarter ended 26 July. Revenue was 106% higher and operating profit 124% higher than a year earlier. This result confirmed that demand for the supplier remained real. Its customers, however, pay for equipment, data centres and electricity infrastructure before receiving all their expected revenue.
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Early September: prices brought attention back to interest rates
On 9 September, the US Energy Information Administration raised its forecast for the average Brent price in the second half of the year to around $90 per barrel. The publication used model inputs finalised by 3 September. It therefore does not measure the impact of later military reports in September and is not the latest exchange price.
On 10 September, the European Central Bank announced another 0.25 percentage point rate increase. On 11 September, the US Consumer Price Index showed annual price growth of 3.4% in August, unchanged from July. Seasonally adjusted monthly growth increased from 0.1% to 0.4%. However, annual growth in the basket excluding food and energy slowed from 2.5% to 2.4%. Monthly growth in this basket nevertheless increased from 0.2% to 0.3%. Prices therefore rose faster over the month even though annual inflation slowed for some goods and services.
The interest rate path in one place
The table shows changes to key US and euro area interest rates announced within this twelve-month period through 30 September, the July decisions to leave them unchanged, and an earlier US decision establishing the starting backdrop. It is not a list of every meeting. Europe’s decision announced on 10 September took effect on 16 September.
| Decision date | Region | Before | After | When it applies |
|---|---|---|---|---|
| 2025-09-17 | US | 4.25–4.50% | 4.00–4.25% | From 18 September |
| 2025-10-29 | US | 4.00–4.25% | 3.75–4.00% | From 30 October |
| 2025-12-10 | US | 3.75–4.00% | 3.50–3.75% | From 11 December |
| 2026-06-11 | Euro area | 2.00% | 2.25% | From 17 June |
| 2026-07-23 | Euro area | 2.25% | 2.25% | Left unchanged |
| 2026-07-29 | US | 3.50–3.75% | 3.50–3.75% | Range left unchanged |
| 2026-09-10 | Euro area | 2.25% | 2.50% | In effect from 16 September |
| 2026-09-16 | US | 3.50–3.75% | 3.75–4.00% | From 17 September |
For the US, the table shows the federal funds target range; for the euro area, it shows the specific deposit facility rate. Europe’s 2.50% rate took effect on 16 September. On 30 September, the prevailing US range was 0.25 percentage points lower than after the decision of 17 September 2025 that established the starting backdrop. The European deposit rate rose 0.50 percentage points. The US increase of 16 September is included in the table.
? Consumer Price Index: why does the monthly change matter too?
The Consumer Price Index is compiled using the prices of goods and services and their weights in consumption. The annual change compares prices with the same month of the previous year. The seasonally adjusted monthly change helps show the latest pace. The annual figure can therefore remain unchanged even when prices rise faster in the latest month.
Mid-September: oil supply was forecast to fall more than demand
The International Energy Agency’s 11 September forecast projects a larger decline in oil supply than in demand this year. This is a forecast, not a final annual result.
16–24 September: US bond yields rose again after a brief decline
On 16 September the Federal Reserve raised its target range to 3.75–4.00%. An earlier European decision lifting the deposit rate to 2.50% took effect on the same day. The US ten-year yield fell to 4.96% on 21–22 September, but reached 5.18% on 24 September. The fall in US bond yields was therefore short-lived.
The preliminary S&P Global US PMI Composite Output Index, covering manufacturing and services activity, reached 58.4 in the release of 23 September, compared with 56.0 in August. Seasonally adjusted initial unemployment benefit claims of 197,000 for the week ending 19 September, released on 24 September, added to the evidence that the economy was not weakening sharply. These are signals from 23–24 September, but neither a survey nor one week of claims is a final measure of an entire quarter’s growth.
? Purchasing Managers’ Index: what does the threshold mean?
The company survey compares activity with the previous month. Above 50 generally indicates expansion and below 50 contraction. A reading of 58.4 does not mean growth of 58.4%; the preliminary measure may be revised.
September’s decisions extended beyond the US and euro area. On 18 September the Bank of Japan set an overnight interest-rate target of 1.25%, effective from 24 September. On 17 September the Bank of England left Bank Rate at 3.75%. These different paths matter for Japanese bonds and yen-funded investments, as well as British companies’ borrowing costs.
25–28 September: uneven demand and trade relief not yet in force
US August durable-goods orders, reported on 25 September, reached $338.6 billion and were virtually unchanged from revised July. Orders for non-defence capital goods excluding aircraft nevertheless rose 1.6%, while shipments increased 0.6%. These are monthly changes adjusted for seasonality, but not for prices. On the same day, the University of Michigan’s final September consumer sentiment index stood at 48.1, compared with 51.7 in August. Business-equipment demand and households’ assessments were therefore sending different signals.
On 27 September, the White House published US and Chinese product lists proposed for lower import tariffs worth about $30 billion in each direction. The US list of imports from China includes plastic tableware and bedding; China’s list of imports from the US includes beef and dairy products. This publication did not bring tariff reductions into force. On 28 September, China reported that August profit at larger industrial enterprises was 4.2% higher than a year earlier; July’s growth was 11.2%. These are year-on-year comparisons; they do not show whether profit rose or fell from July to August. Companies’ profits would depend not only on lower tariffs, but also on selling more goods at profitable prices.
US spending grew, but household income did not rise after inflation
US household spending supported economic growth in August. On 30 September, the Bureau of Economic Analysis reported that spending increased by 0.6% over the month after removing price changes. However, inflation-adjusted disposable income was unchanged. The increase in spending was therefore not matched by growth in current income. Wages, savings and access to credit will matter for whether households can sustain that pace.
The price figures did not show a fresh decline in annual inflation. In the data revised on 30 September, the Personal Consumption Expenditures Price Index was 3.4% higher in August than a year earlier; excluding food and energy, the increase was 3.0%. July’s figures in the same revised series were identical. Comparing July’s earlier published estimate with August’s new figure would confuse a change in historical estimates with a change in prices.
? Personal Consumption Expenditures Price Index: what does it measure?
The index, known as PCE, measures changes in prices of goods and services bought for consumers, including some spending on their behalf. Excluding food and energy helps separate frequently volatile prices; 3.0% is annual price growth, not a monthly change or growth in the quantity consumed.
The same agency revised second-quarter real gross domestic product growth from a 1.5% to a 2.2% annualised rate, or roughly 0.6% over the quarter. Higher investment and spending estimates indicate firmer demand in April–June. This was not a September growth surge: the first estimate for July–September will be published on 29 October.
The US ten-year yield rose from 4.75% to 5.29% during September
Long-term US borrowing costs increased during September. The ten-year Treasury yield stood at 5.29% on 30 September, compared with 4.75% on 31 August, a rise of 0.54 percentage points. Its increase on 30 September alone was 0.03 percentage points. The whole month’s rise cannot be attributed to yesterday’s consumer-spending release.
? Yields and basis points: how should the change be read?
The US Treasury table gives a standardised annual yield for each maturity. One basis point is 0.01 percentage points, so an increase of 0.54 percentage points equals 54 basis points. This is not an investment return: when yields rise, the price of an existing fixed-rate bond generally falls.
Over the full calendar third quarter, from 30 June to 30 September, the ten-year yield rose from 4.44% to 5.29%. That matters for long-duration bond funds and businesses that need to refinance. September’s policy rate increase forms part of the backdrop, but market yields also reflect inflation expectations, bond supply and the compensation investors require for lending over a longer period.
German energy prices are rising faster, but other prices are not accelerating uniformly
On 30 September, Germany’s statistical office estimated annual September inflation at 3.3%, up from 2.9% in August. Energy inflation accelerated from 10.5% to 14.9%. However, annual price growth excluding food and energy remained at 2.4%, while services inflation slowed from 2.8% to 2.7%. A higher headline rate does not mean that all costs have started rising faster.
France’s preliminary September inflation measured under the common European Union methodology, released the same day, rose from 2.6% to 3.4%. European Central Bank Executive Board member Isabel Schnabel stressed the impact of higher energy prices on other prices and expectations on 30 September. This was a new assessment, not a new interest-rate decision: the 2.50% deposit rate has been in effect since 16 September.
? Harmonised Index of Consumer Prices: why can it differ?
The Harmonised Index of Consumer Prices allows price growth across European Union countries to be compared under a common methodology. Its coverage and weights can differ from the national index, so France’s 3.4% figure here is not its national-index reading.
Chinese manufacturing recovers, but orders and profits are different measures
China’s National Bureau of Statistics reported on 30 September that its manufacturing Purchasing Managers’ Index, or PMI, rose from 49.8 to 50.1 in September. The production index strengthened to 51.7, but the new-orders reading edged down from 50.6 to 50.5. Companies increased production, yet the survey did not show a broader acceleration in orders.
The raw-material purchase-price index meanwhile rose from 56.6 to 60.8. This is an important qualification to the stronger production reading: producing more does not necessarily mean earning more. Chinese industrial businesses need to cover higher costs, while European equipment and materials suppliers need actual new orders, not just higher output at their customers.
US crude stocks rose, but finished-fuel inventories fell
On 30 September, the US Energy Information Administration released inventories for the week ending 25 September. Commercial crude stocks stood at 427.3 million barrels, 2.6% above the comparable week a year earlier. Petrol inventories, however, were 7.4% lower and distillates, including diesel and heating products, were 14.9% lower. All three percentages use the same year-on-year comparison principle.
This distinction matters for transport and industrial companies: crude in storage is not yet fuel delivered to a driver. If refineries process less crude, fuel availability can remain constrained even as crude inventories rise. That could support refiners’ selling prices while increasing hauliers’ fuel bills; actual prices and company profits still need to be assessed separately.
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Year
What matters now
A bond buyer and a company refinancing a loan face different opportunities
For a new US bond buyer, a higher yield offers the prospect of more future income. The same change is adverse for the prices of existing long-term fixed-rate bonds. Property businesses, utilities and companies building infrastructure with borrowed funds may face more expensive new financing. Payments on previously agreed fixed-rate loans do not automatically change as a result.
Stronger consumer spending supports revenue at US retailers and service businesses. The risk would increase if household income continued to stagnate and spending had to be cut. In Europe, chemical and transport companies paying more for energy face the opposite pressure: the same sales can leave less profit. October’s labour-market and price releases will help establish which force is gaining strength.
September’s dollar effect for euro investors differed from the full quarter
At the European Central Bank’s reference rates, one euro bought 1.1596 US dollars on 31 August and 1.1355 on 30 September. The euro weakened by 2.08% during September. If an asset’s dollar value had stayed entirely unchanged, its euro value would have risen by about 2.12% from currency conversion alone, before costs and without currency hedging. That is a separate exchange-rate effect, not the return on US shares.
The full-third-quarter currency effect was much smaller: from the 30 June rate of 1.1394 to 30 September, translating an unchanged dollar asset value into euros would have added about 0.34%. September’s result therefore cannot simply be applied to the whole quarter. A stronger dollar helped a euro investor holding unhedged US assets this month, but a later euro recovery could reverse that effect.
Year
What comes next
- 2 October: the US September employment report. Changes in employee numbers and wages will help assess whether household income can continue to support spending.
- 7 October: US weekly fuel inventories; 14 October: September consumer prices. The question is whether finished-fuel stocks continue to fall and whether higher energy costs affect a broader range of prices.
- 28–29 October: central bank decisions and US growth data. The US central bank decision is scheduled for 28 October; the ECB decision and the first US third-quarter growth estimate for 29 October. These will allow investors to assess actual quarterly growth and the banks’ responses to the new data.
Important. This is general market analysis, not a personal recommendation to buy or sell. Historical data and company results do not guarantee future returns. Forecasts and conditional scenarios may not materialise.
How is the history preserved and updated?
All five periods in this edition share one information date. Week means the latest 7 days, quarter means 90 days, and year means the trailing 12 months. The next dated edition will have a separate URL. This text keeps its date and assessment; later events are not silently inserted into an older edition. Longer periods assess new evidence alongside earlier developments without repeating every headline.
