UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'Can anyone argue for rate cuts?'
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Jul 18, 2025 Explore the contentious terrain of potential US interest rate cuts and the political implications behind them. Delve into how consumer sentiment is shaped by political divides, influencing economic perspectives. Discover the nuances of inflation statistics and their surprising effects on voter behavior, particularly during election seasons. Plus, gain insights into Europe's stable core inflation rates and the economic challenges posed by ongoing trade tensions with the U.S.
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Political Barriers to Rate Cuts
- Advocating for US rate cuts is politically sensitive due to the current administration's policies.
- Fed Governor Waller made economic arguments for cuts, but the view is overshadowed by politics.
Inflation Impact of Trade Taxes
- US inflation partly stems from President Trump's trade taxes, causing one-off effects.
- There are risks of second-round inflation effects which the Fed must consider carefully.
Unusual Policies Heighten Uncertainty
- Economic uncertainty is elevated due to the administration's unusual policies and announcement style.
- This uncertainty complicates the Federal Reserve's economic outlook and decision-making.