UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'How far, how fast is the retreat?'
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May 8, 2025 The discussion kicks off with concerns about rising uncertainty in the economy and its potential impact on inflation and unemployment. Attention shifts to the Fed's reactive approach to policy changes, highlighting the dangers of relying on increasingly unreliable economic data. Trade announcements, especially those involving tariffs with the UK, are explored as they could significantly influence the economic landscape moving forward. It's a fascinating look at how these factors intertwine in today’s financial climate.
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Fed's Reactive Data Dependency Risk
- The Federal Reserve is currently highly data dependent, reacting to data rather than pre-empting it.
- This reactive approach risks being late on policy changes due to unreliable economic data quality.
Tariff Uncertainty Hurts Economy
- Uncertainty from tariffs has caused more economic damage in the US than the tariffs themselves.
- Shortening the period of uncertainty is crucial to minimizing additional economic damage.
UK Rate Cuts Amid Global Disinflation
- The Bank of England is expected to cut rates due to global disinflationary pressures.
- Domestic tariffs and UK-US trade deals are unlikely to significantly affect UK inflation or Bank decisions now.