UBS On-Air: Paul Donovan Daily Audio 'End the Fed'
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Good morning. This is Paul Donovan, Chief Economist at UBS Global Wealth Management. It's seven o'clock in the morning London time on Monday the 31st of March. From time to time, these morning comments may have given the impression of disagreement with the actions of the US Federal Reserve.

Undoubtedly, Fed Chair Powell has made policy errors, and the mantra of data dependency puts a dangerous and naive amount of faith in the quality of US economic numbers. However, while there may be disagreement, at no point has there been any suggestion in these comments that abolishing the Federal Reserve would be a good idea.

Last night, US President Trump's influential donor, Musk, reiterated a desire to, quote, end the Fed. This has been heard before, and indeed, Project 2025's blueprint, much of which has been attempted, includes the idea of abolishing the US central bank. However...

These comments are coming ahead of what is expected to be a very disruptive set of trade taxes and at a time when rule of law in the United States is starting to be questioned. If this sort of commentary evolves beyond political theatre to be part of a political discussion, then there have to be serious questions about the role of the dollar in the global financial system. The dollar's reserve status was acquired before the Fed was independent.

but the Fed certainly existed. Financial markets are currently assessing trade tax fears. Over the weekend, Trump threatened more taxation with so-called secondary tariffs, essentially sanctions, on buyers of Russian oil in the event that Russian President Putin did not conclude a ceasefire with Ukraine.

While these threats are not perhaps significant of themselves for financial markets, they do stress Trump's willingness to increase the tax burden on US consumers in pursuit of a wider policy agenda. The risks with this strategy are that while trade with the United States is important to many economies, it is not the most important part of economic activity for any economy.

We get the release of the Dallas Fed Manufacturing Survey of Business Sentiment. This is of little use of itself, but the comment section has assumed more importance than its traditional comedic value. Economists need to see if economic realities are penetrating the partisan media bubbles that undoubtedly exist in the United States. Are Democrats becoming more positive or Republicans becoming more negative?

Last week's revised Michigan consumer sentiment data suggested that the bubbles remain impregnable for now. Republicans actually became more optimistic at the end of March, and Democrats hit an all-time extreme level of pessimism.

The comments section of the Dallas Fed survey offers some insights into more Republican-leaning thinking in an area of the U.S. economy that is perhaps specifically vulnerable to trade taxes. German February retail sales data were stronger and is so often the case with German data. The previous month's figures were revised higher, quite substantially.

German retail sales have been revised higher, often substantially, for 11 of the last 12 months. While the reported headlining GDP in Germany has been negative, the German consumer has actually been spending money quite happily. We'll get March preliminary German consumer price inflation data today. This is actually one of the few numbers that Germany rarely revises. And it comes after some benign French and Spanish data last week.

Italy will also be releasing its consumer price figures. 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. Its subsidiaries, or affiliates, collectively referred to as UBS.

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