Monetary Policy Market Wrap August 2025

Key Trends

August featured a tug-of-war between a notably dovish Fed pivot and resurging inflation. Powell’s dovish remarks and a strong GDP revision in late August lifted rate‑cut probabilities and produced multi‑day equity gains and intraday record highs. By month‑end, an inflation gauge that hit a five‑month high (Aug 31) dimmed near‑term cut expectations and shifted sentiment toward caution, prompting rapid re‑pricing of the Fed path and increased intra‑week volatility.

Notable Events

Powell’s dovish commentary (Aug 27–28) and an upside GDP revision (Aug 29) catalyzed rallies. Markets also reacted to an Aug 31 inflation print that reversed some optimism. Asset‑flow moves were notable: Gold ETFs jumped (~+5%) after Powell and the weaker dollar, Bitcoin reached about $112k before BTC/ETH ETF outflows on Aug 31, Opendoor surged roughly 48% over five days, and Citizens Financial hit a 52‑week high.

Performance

Equities swung materially: the S&P 500 rallied roughly 3.5% over the week ending Aug 29, including consecutive +1.5% days, but slid ~0.4% on Aug 30–31 as inflation data undermined cut expectations. Gold ETF assets rose ~5% on safe‑haven demand, while crypto flows reversed late in the month. Overall, growth‑sensitive sectors showed heightened sensitivity to Fed repricing.

Outlook

Monetary policy guidance and incoming inflation/labor data will govern September positioning. Persistent inflation would push cuts further out, favor safe havens and sustain volatility; clearer disinflation would revive easing bets and risk appetite. Key near‑term watchpoints: CPI/PCE prints, payrolls, FOMC minutes and ETF flow patterns in gold and crypto.