Good morning, this is Paul Donovan, Chief Economist at UBS Global Wealth Management. It's 7 o'clock in the morning London time on Tuesday the 23rd of September. US Federal Reserve Chair Powell is to speak on the economic outlook today at the Greater Providence Chamber of Commerce.
The Greater Providence Chamber of Commerce is of course in for a treat. Powell is unlikely to deviate too much from the tone of the last FOMC meeting, it would be very difficult to do so, but the nuance of where rates will end up is of some interest. Some members of the Federal Reserve have suggested further rate cuts are less likely this year.
And then yesterday Fed Governor Mirren suggested interest rates needed to be two percentage points lower. Coincidentally that is the view of a person outside the Fed too. The audience of economists listening to Mirren might have questioned the consistency of some of their arguments if, as Mirren suggested, tariffs do not cause inflation and US monetary policy is so extremely restrictive, it's hard to understand why core inflation, and especially inflation for durable goods, is actually rising.
Argentinian President Millet is to meet US President Trump today. Millet is not expected to bring their chainsaw to the meeting, instead Millet will be bringing a list of requests, top of which is likely to be money. US Treasury Secretary Besant has been channelling their inner Draghi and delivering a whatever it takes set of comments, without actually promising anything specific at this stage.
Besant does have access to US taxpayer money that could be put to use in Argentina, but because it is US taxpayer money, the politics of this will require conditions to be attached. The financial markets response so far has been muted. The peso did rally against the dollar, but even against the dollar it's only back at the level of a couple of weeks ago.
Against the euro the rally is obviously less. There is a great deal of uncertainty about what happens next, the conditions Trump will attach to any handouts, the US politics of all of that, and the practicalities of those conditions given the Argentine electoral cycle, and so on. The data calendar is littered with business sentiment polls, clamouring for attention that they don't really merit.
The divorce between sentiment and reality in Europe has been noted, and in the States the degree of political polarisation in survey responses is becoming farcical. The latest iteration has Republicans living in a crime-ridden hellscape, barely able to leave their homes, while Democrats leave their doors wide open and their smartphones lying around unattended. Probably not that extreme, as the idea of any US consumer leaving their smartphone unattended stretches credibility beyond endurance, even in survey evidence.
Sweden's Riksbank is expected to leave interest rates unchanged. The Bank of England Governor Bailey gave a plea for more investment in data collection, which given the deterioration in economic data quality in recent years, must be echoed by most economists around the world. There are more Fed speakers who will presumably offer a spectrum of views on the outlook for rates, but the opinion is most likely going to remain within touching distance of the Fed's decision.
That's all for today. Have a good day. This material has been prepared and published by the Global Wealth Management Business of UBS Switzerland AG, regulated by FINMA in Switzerland.
It's subsidiaries, or affiliates, collectively referred to as UBS. In the USA, UBS Financial Services Inc. is a subsidiary of UBS AG, and a member of FINRA SIPC. The investment views have been prepared in accordance with legal requirements designed to promote the independence of investment research.
This material is for your information only, and it is not intended as an offer, or a solicitation of an offer, to buy or sell any investment or other specific product. The analysis contained herein does not constitute a personal investment recommendation or take into account the particular investment objectives, investment strategies, financial situation and needs of any specific recipient. This material may not be reproduced or copies circulated without prior authority of UBS.
Please visit www.ubs.com forward slash CIO hyphen disclaimer to read the full legal disclaimer applicable to this material.