Monthly letter July 2025

Key events

The semester may be new, but the world’s flashpoints remain the same—even as they continue to evolve. In the Middle East, the brief but violent clash between Israel and Iran has already entered the history books as the “12-Day War.”

Yet Prime Minister Netanyahu insists that true regional security remains distant, citing this as justification for fresh airstrikes in Syria and sustained pressure on Gaza.

There, the humanitarian crisis has reached dire proportions, prompting some international leaders to abandon their passivity. French President Macron, Britain’s Prime Minister Starmer, and Canada’s President Carney, among others, have voiced support for the recognition of a Palestinian state, while Arab leaders are pressing Hamas to engage in negotiations over the fate of Israeli hostages.

Meanwhile, on the Ukrainian front, Russian military operations show signs of intensifying. What has drawn even greater attention, however, is Donald Trump’s abrupt shift in tone: the former U.S. president declared that he has “lost patience” with Vladimir Putin and is demanding an immediate halt to Russian strikes.

Whether this verbal escalation will translate into concrete action remains to be seen. From Moscow, the response so far has been nothing but cold silence.

“ I don’t plan to fire him. I think he’;s done some things I don’t like, but that doesn’t mean I’ll fire him.” Donald J. Trump was referring to Jerome H. Powell after meeting with him at the construction site of the Federal Reserve headquarters on July 24.

This space is usually reserved for economics and central banks. On this occasion, however, it is impossible to ignore the mounting pressure Donald Trump is placing on Federal Reserve Chairman Jerome Powell.

The confrontation has taken on a sharper tone, with increasingly thinly veiled calls for a swift change at the helm of the U.S. central bank. Beneath the rhetoric, the political demand is clear: an immediate cut in interest rates.

The formal pretext for questioning the institution’s independence has been the ballooning costs of the Fed’s headquarters renovation project, which has risen to USD 2.5 billion from the originally budgeted 1.9 billion. Both the Fed and the European Central Bank have recently held their regular meetings.

Against the backdrop of heated debate over U.S. tariffs, there is growing interest in understanding their potential impact on growth and inflation.

The central risk is the emergence of the most difficult scenario to manage: an economic slowdown accompanied by an increase in the cost of living. Such dynamic would place central banks in an uncomfortable position, asked simultaneously to cut rates to support growth while raising them to reduce inflation.

The ECB has reiterated its view that the current economic environment, along with the rate cuts already implemented in the early months of the year, allows it to assess developments without undue pressure.

The Fed, for its part, convened toward the end of the month. Within the committee, there are voices in favor of a rate cut. Powell, however, has stressed that any decision must wait for a clearer assessment of the tariffs’ impact on the economy.

The priority, he insists, remains understanding how the broader economic landscape is evolving.

Prospects

The issue of tariffs continues to dominate attention: the Trump administration has set August 1 as the final deadline for reaching agreements that could avert severe measures.

Even with the deadline fast approaching, visibility remains poor, not least because even the agreements already signed leave ample room for interpretation.

It is also worth noting that the early weeks of August are typically marked by thin trading volumes in financial markets, a factor that in the past has often gone hand in hand with pronounced volatility.

We wish all of you a pleasant summer, with the hope that greater clarity and calm in the international geopolitical climate will arrive as soon as possible