UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'Inflation, disinflation, and deflation'
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Aug 20, 2025 UK inflation rates are slightly higher than anticipated, largely driven by a seasonal spike in airfares. Disinflation trends are also in play, particularly affecting food prices. Meanwhile, Japan faces export challenges, specifically in the automotive sector, due to price cuts for US buyers. Insights from the latest Federal Reserve meeting shed light on potential future monetary policy adjustments.
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July UK Inflation: Mixed Signals
- UK July inflation was slightly above expectations while most items showed disinflation.
- Airfares spiked 30.2% month-on-month, likely a seasonal school-holiday distortion that inflated the year-on-year rate.
Food Prices Hint At Profit‑Led Inflation
- Food price increases may revive interest in profit‑led inflation models among economists.
- Headline politics may overstate the issue since underlying details are less alarming.
Stablecoins Reorder, Not Create, Money
- Stablecoins shift the composition of money rather than creating new money out of nowhere.
- Buying stablecoins requires funds from elsewhere, so the net effect on T‑bill demand can be neutral.