UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'Self-inflicted slowdowns and the Fed'
Apr 17, 2025
The discussion highlights the impact of President Trump's trade taxes on inflation and economic growth, as pointed out by Federal Reserve Chair Powell. Powell suggests that despite rising consumer inflation expectations, there could still be room for rate cuts. The complexities of Japan's role in holding US Treasuries and its aging society's influence on trade are also examined. Additionally, the reliability of sentiment surveys in today's volatile market conditions raises eyebrows, adding an intriguing layer to the economic analysis.
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Impact of Trump's Trade Taxes
- US President Trump's trade taxes are expected to raise inflation and slow economic growth more than the Fed anticipated.
- Markets had predicted this, but Powell's confirmation shifts expectations about Fed policy.
Fed's Rate Cuts Amid Slowdown
- The Fed will likely cut rates amid growth weakness but remain cautious due to inflation concerns.
- The slowdown is self-inflicted by erratic policies, limiting how aggressively the Fed offsets economic weakness.
US-Japan Trade Deal Dynamics
- The US-Japan trade deal talks show big progress but highlight the power's concentration in President Trump.
- Japan's economic context as a large US Treasury holder with an aging population contrasts with old 1980s trade strategies.