UBS On-Air: Market Moves

The expected error from the ECB was accompanied by rhetoric citing concerns about oil price pressures broadening throughout the Eurozone economy. There is no evidence of this reported broadening—non-oil prices should be expected to pass on oil-related costs, and only a wage-spiral or profit-led inflation would constitute a broadening of inflation pressures. These are notable by their absence. Nonetheless, the Teutonic cry of “we must have discipline” seems to be echoing throughout the ECB, raising the risk that the error will be compounded with a further rate increase.

The ECB is almost certain to commit a policy mistake today. Raising rates will not change Eurozone inflation or inflation expectations. This policy is stuck in an unhelpful 2022 mindset. Consumers will continue to reduce savings rates to pay for higher oil prices. The main consequence of today’s error is to increase fragility in the economy, rather than doing more serious damage.

On this episode of Viewpoints, with the commencement of the World Cup tournament just days away, Burkhard outlines the economics of soccer and the highly anticipated event. We also touch on the direction of interest rates, and the prospects for newly minted Fed Chair Kevin Warsh having to begin his term with a rate-hike, rather than a rate-cut.

May US headline consumer price inflation is expected to rise as the price of the Iran war is being passed through relatively quickly to consumers. A supply shock might have a delayed effect (with profit margins being squeezed), but the very visible cause of price increases and the precedents of the pandemic supply shocks and tariffs make it easier for firms to pass on higher costs without delay (limiting damage to profits, so long as demand does not falter).

Join Jeff Hans, Senior Portfolio Manager for the House View Equity Portfolios with UBS Asset Management, as he shares a performance update and outlook for US equities. Host: Dominic Schagar, Senior Equity Investment Specialist. Recorded on 27.05.26