UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'Another little cut'
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Oct 29, 2025 The Federal Reserve is likely to cut rates, with policymakers focusing more on medium-term trends due to unreliable short-term data. There’s a keen interest in the tone of the upcoming press conference and speculation surrounding Powell's potential successor. Interestingly, the Fed’s rate cut is seen as a safeguard for a fragile labor market rather than a reaction to falling inflation. Meanwhile, China plans to boost domestic consumption, and Spain's economy shows impressive resilience post-pandemic.
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Data Scarcity Forces A Medium-Term Focus
- Reliable short-term US economic data is largely unavailable ahead of the Fed meeting.
- Paul Donovan says policymakers must therefore focus on medium-term trends rather than Powell's usual short-term data dependency.
Market Focus: Views, Tone, And Succession
- Markets will watch the range of views and press-conference tone at the Fed meeting closely.
- Donovan expects inevitable speculation about Powell's successor following political comments.
Rate Cut As Labour Market Insurance
- The Fed's likely rate cut is driven by labour-market brittleness, not falling inflation.
- Donovan frames a cut as insurance against job losses that could raise unemployment fears and curb consumption.