UBS On-Air: Paul Donovan Daily Audio 'Fed up'
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The US Federal Reserve meets; Fed Chair Powell (who is not an economist) will then talk about economics. The absence of a serious inflation threat means monetary policy is not an investor concern. Repeated positive economic surprises mean that quantitative policy (bond buying) is
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4 itemsUBS On-Air: Paul Donovan Daily Audio 'US rates paths'
Per the full note [source], UBS Chief Economist Paul Donovan argues that the FOMC meeting minutes and Fed Governor Waller's speech are the key events today, with the market focused less on the current economy and more on political uncertainty in 2025. Donovan expects inflation to moderate in H1 2025, allowing the Fed room to ease, but sees political risks to inflation as a later concern. The desk's base case is that the Fed will cut rates in the first half of the year, though internal Fed divisions add nuance. This view aligns with a modestly bullish USD stance near term, but the broader path hinges on political developments.
UBS On-Air: Paul Donovan Daily Audio 'Three and one from the Fed'
The desk believes that Fed Chair Powell's upcoming remarks will be pivotal, particularly in light of the recent surge in oil prices and the potential for Powell to extend his tenure beyond May. It seems investors are keen to understand how the Fed will respond to rising inflation from energy costs, particularly noting that gasoline prices have increased by 35.5% from recent lows, which could influence profit-led inflation dynamics. Per the full note from UBS, Powell's communication might factor into future monetary policy directions significantly. This timing becomes critical as the market anticipates no major changes in policy at the Federal Reserve's next meeting due to the absence of pressing economic data releases in the near term, avoiding catalysts that could shift market focus away from Powell's guidance.
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