UBS On-Air: Paul Donovan Daily Audio 'Capping inflation'

Paul Donovan· Host0:01

Good morning. This is Paul Donovan, Chief Economist at UBS Global Wealth Management. It's seven o'clock in the morning, London time, on Wednesday the twentieth of May. Bond yields have continued to move up, a shift that has started to impact equity markets as well. There is a hope amongst investors that sufficient pain in the bond markets might attract the attention of the US administration and push towards an end of the war. While this worked with the imposition of tariffs last year, tariffs were something that were, at the time, directly under the control of the US President and could be reversed on a whim. The Middle East is a little more complex than that, and investors have shown less and less willingness to react to US President Trump's announcements on the war unless there is independent verification or a reaction from the Iranian government. Comments on the war from China's President Xi, currently meeting with Russian President Putin, might be seen more favorably by investors as China may have some influence with Iran. Inflation perception is driven largely by high-frequency purchases that people make. That means that food and fuel prices have disproportionate political weight, which is why the soaring price of gasoline is so important in the United States.