UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'Can US inflation be hedged? '
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Aug 12, 2025 The podcast delves into U.S. inflation trends and the ripple effects of trade taxes on consumer prices. It highlights concerns over the reliability of inflation data, affected by funding cuts and limited price measurements. The discussion also touches on labor market trends and their impact on government bonds, emphasizing the importance of data integrity amid political challenges. Listeners gain insights into navigating inflation risks and the evolving landscape of consumer behavior.
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Tariffs Raise Consumer Prices
- US July CPI will show more of April trade taxes seeping into the shopping basket.
- Each 10% tariff raises consumer prices by ~4%.
Services Drive Most Consumer Inflation
- Services make up the majority of US consumer inflation and are less affected by trade taxes.
- Trade taxes mainly hit durable goods, reducing disinflation rather than creating strong services inflation.
CPI Data Quality Is Declining
- Budget cuts and fewer price points mean US CPI data is now less reliable.
- This reduces confidence in measured inflation even without political bias.