UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'To and fro'
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Nov 18, 2025 The latest insights reveal a bleak outlook on the US labor market, with calls for potential rate cuts by the Fed. Rising affordability concerns could slow the pace of policy easing, as highlighted by Fed Vice-Chair Jefferson. Tariff effects might push inflation higher in the near term, with companies likely to pass on costs. There’s also a warning about profit-led inflation extending beyond the transitory phase. Additionally, political tensions between China and Japan raise concerns about tourism and economic impacts.
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Fed Public Split Creates Policy Uncertainty
- Federal Reserve officials show public divisions on policy direction, reflecting a complex economic outlook.
- That to-and-fro means policy uncertainty is likely to persist in markets.
Labour Risk Versus Affordability Tension
- Some Fed members prioritize guarding the labour market and may cut rates as insurance against shocks.
- Others worry rising affordability concerns argue for a slower pace of easing.
Tariffs Could Temporarily Lift Inflation
- Inflation may rise into Q1 due to lagged tariff effects and firms passing through costs.
- If tariff-driven, inflation should be temporary, but profit-led second-round effects would worry policymakers.