UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'Masterful inactivity'
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Jul 10, 2025 The latest discussion delves into the Federal Reserve's indecision and its implications for interest rates amidst trade tax inflation. The panel reflects on the potential one-off nature of these tax impacts, assessing how they could affect consumers and manufacturers. Uncertainty looms over employment trends and jobless claims, revealing insights into the labor market's fragility. The overarching theme? A curious blend of indecisiveness and the consequences of policy inaction guiding the economic landscape.
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Fed's Masterful Fence-Sitting
- The Fed minutes showed a masterclass in sitting on the fence regarding trade tax inflation and labor market concerns.
- The overall policy stance is to wait and see amid uncertainty about inflation's persistence and labor market strength.
Second-Round Tariff Effects Matter
- The direct effect of tariffs is easier to calculate than timing, which depends on supply chain inventories.
- The bigger worry is the second-round effects like profit-led inflation and supply chain disruptions influencing inflation.
Masterful Inactivity by Fed
- The Fed's default policy is skillful inaction amid data and policy uncertainty.
- Trump's latest tariffs are politically symbolic, targeting countries with limited US exports to appear tough without major economic impact.