Stock markets surge worldwide on mild inflation data

Following the release of mild inflation data, global stock markets experienced a surge as of August 13, 2025. This positive market movement was primarily driven by renewed expectations of potential interest rate cuts by central banks, especially the U.S. Federal Reserve. 

Mild Inflation Data and Market Expectations

Recent inflation data indicated a moderation in price pressures, with the U.S. consumer price index rising just 0.2% in July, resulting in an annual increase of 2.7%. Similarly, India’s retail inflation eased to 1.55% in July. This benign inflationary trend has bolstered hopes that central banks may ease monetary policy, potentially cutting interest rates to stimulate economic growth. 

Impact on Stock Markets Worldwide

The anticipation of interest rate cuts has fueled positive sentiment in stock markets worldwide. Lower interest rates typically reduce borrowing costs for businesses and consumers, encouraging spending and investment. This can lead to increased corporate earnings and potentially drive stock prices higher. 

Market Performance

As of August 13, 2025:

• The S&P 500 in the U.S. surpassed 6,400, reaching a new record high.
• European stocks also climbed higher, tracking gains on Wall Street, with the DAX in Germany up 0.4%, the CAC 40 in France gaining 0.3%, and the FTSE 100 in the U.K. rising 0.2%.
• In Asia, Japan’s Nikkei index reached a record peak.
• Indian benchmark indices, Sensex and Nifty, also opened higher, reflecting positive trends in Asian markets, with the Nifty 50 rising 0.45% and the Sensex climbing 0.39%. 

Factors Contributing to the Surge

Several factors contributed to this global stock market surge:

• Renewed Expectations of Interest Rate Cuts: The mild inflation data fueled hopes of potential interest rate cuts by central banks, boosting market sentiment.
• Strong Economic Recovery: The global economy is projected to rebound, driven by pent-up demand and government stimulus, which has increased investor confidence.
• Continued Dovish Stance by Central Banks: Central banks worldwide have maintained a generally accommodative stance, keeping interest rates low to support economic growth, making stocks more attractive compared to fixed-income investments. 

Expert Opinions

Market analysts suggest that the latest inflation figures provide the Federal Reserve with the flexibility to implement a rate cut, potentially by 25 to 50 basis points. Economists anticipate that subdued food inflation in India will continue, citing factors like strong monsoon progress and robust Kharif sowing, contributing to agricultural output and price stability.