Fed: Powell's policy problem - UBS

A total of 52 out of 52 surveyed economists expect a quarter point ECB rate reduction today. 'How could so many economists possibly be wrong?', UBS' economist Paul Donovan asks.

US economy is plagued by growth and inflation uncertainty

"US President Trump is likely to become even more irate after criticizing the Federal Reserve for not cutting rates. Fed Chair Powell's insistence on data dependency certainly increases the risk of policy error (policy operates with a lag, and real time data is increasingly unreliable). While data dependency is normally a bad option, there may be little choice now. Per yesterday's Beige Book, the US economy is plagued by growth and inflation uncertainty."

"US first quarter productivity data is not market moving. Actual productivity matters enormously to long-term trend growth. Technology should boost productivity, but also increases fear of the future. That encourages scapegoat economics--scared populations blame others for their insecurities. Groups whose status recently improved (e.g., LGBTQ+ groups) and foreigners are traditional scapegoats. The resulting prejudice politics undermines long-term growth. How we use technology is what really matters, which requires the right person, the right job, and the right time. Random immigration bans, attacks on LGBTQ+ people, and economic nationalism undermine trend growth."

"German April factory orders were stronger than consensus expectations, but this is so volatile a series the consensus is a huge spectrum."