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The latest inflation report from the US came out hot. The US inflation spiked to 7.5% versus an expectation of 7.1%, which is 40 years high. That started speculation that the Federal Reserve of the US will increase the interest rate by 50 basis points in their next meeting on 17 March 2022. I doubt that the increase in inflation is a surprise to the members of the Federal Open Market Committee. However, the latest inflation spike will for sure increase the pressure on the Fed to act fast.
The Fed is late in taking the steps of battling inflation, and if they don’t increase the interest rate by 50bp in their next monetary meeting, that means that we will see three, maybe even four, consecutive rate hikes after the March meeting.
Inflation is not only a problem in the USA. The UK, EU, and Canada are also suffering from high inflation. Contrary to the past, now we have the Fed, ECB, BoE, BoC taking steps to contain the inflation. In the past, all of these Central Banks were in a race to cut interest rates and print money to lift inflation and get the economy going. Now all of them are trying to contain the inflation and slow down the overheated economy. In the past monetary meeting, the ECB also announced plans to stop the support of the economy and decrease bond purchasing. That means that the ECB will not watch the Fed raising interest rates, which lifted the USD and makes it even harder for the EU to fight inflation. Nope, the ECB seems ready, and under political pressure, to act and make changes in their monetary policy to address the increasing inflation.
On top of the changing monetary policies, we have Russia building a massive army on the border of Ukraine, preparing to invade Ukraine. That is a lot of risk for the markets to swallow.
Volatility in the markets increased significantly in the past week, partly because of the geopolitical tensions, but a lot of it was because of market makers dumping positions.
Ending on a positive note, last week China announced that their state funds will start purchasing stocks, as a measure to reduce the markets declines.
Bank of Japan announced last week that it will buy unlimited amounts of 10-year Japan Government bonds.
Focus for the week ahead is on the following economic data releases:
Monday, 14, February 2022
- New Zealand BusinessNZ Services Index
- New Zealand Food inflation m/m
- New Zealand Visitor Arrivals YoY DEC
- China Vehicle Sales YoY JAN
- China FDI (YTD) YoY JAN
- Switzerland Producer & Import Prices MoM JAN
- Switzerland Producer & Import Prices YoY JAN
- Germany 6-Month Bubill Auction
- France 3-Month BTF Auction
- France 6-Month BTF Auction
- France 12-Month BTF Auction
- EU ECB President Lagarde Speech
- US 3-Month Bill Auction
- US 6-Month Bill Auction
- US Consumer Inflation Expectations JAN
Tuesday, 15, February 2022
- Japan GDP Growth Rate QoQ Prel Q4
- Japan GDP Growth Annualized Prel Q4
- Japan GDP External Demand QoQ Prel Q4
- Japan GDP Capital Expenditure QoQ Prel Q4
- Japan GDP Private Consumption QoQ Prel Q4
- Japan GDP Price Index YoY Prel Q4
- Japan Industrial Production MoM Final DEC
- Japan Industrial Production YoY Final DEC
- Japan Capacity Utilization MoM DEC
- Australia RBA Meeting Minutes
- Australia HIA New Home Sales MoM JAN
- UK Claimant Count Change JAN
- UK Unemployment Rate DEC
- UK Average Earnings incl. Bonus DEC
- UK Employment Change NOV
- UK Labour Productivity QoQ Prel Q4
- UK Average Earnings excl. Bonus DEC
- UK 10-Year Treasury Gilt Auction
- Spain Inflation Rate MoM Final JAN
- Spain Inflation Rate YoY Final JAN
- Spain Harmonised Inflation Rate YoY Final JAN
- Spain Harmonised Inflation Rate MoM Final JAN
- Spain 3-Month Letras Auction
- Euro Area Balance of Trade DEC
- Euro Area Employment Change YoY Prel Q4
- Euro Area Employment Change QoQ Prel Q4
- Euro Area GDP Growth Rate QoQ 2nd Est Q4
- Euro Area GDP Growth Rate YoY 2nd Est Q4
- Euro Area ZEW Economic Sentiment Index FEB
- Germany ZEW Economic Sentiment Index FEB
- Germany ZEW Current Conditions FEB
- Germany 5-Year Bobl Auction
- Germany New Car Registrations YoY JAN
- Canada Housing Starts JAN
- Canada New Motor Vehicle Sales DEC
- US NY Empire State Manufacturing Index FEB
- US PPI MoM JAN
- US Core PPI MoM JAN
- US Core PPI YoY JAN
- US PPI YoY JAN
- US Redbook YoY 12/FEB
- US Net Long-term TIC Flows DEC
- US Foreign Bond Investment DEC
- US Overall Net Capital Flows DEC
- US API Crude Oil Stock Change 11/FEB
- New Zealand Global Dairy Trade Price Index
Wednesday, 16, February 2022
- Japan Reuters Tankan Index FEB
- Japan Tertiary Industry Index MoM DEC
- Australia Westpac Leading Index MoM JAN
- Australia RBA Debelle Speech
- Australia RBA Bullock Speech
- China Inflation Rate YoY JAN
- China Inflation Rate MoM JAN
- China PPI YoY JAN
- UK Inflation Rate YoY JAN
- UK Inflation Rate MoM JAN
- UK Core Inflation Rate YoY JAN
- UK Retail Price Index MoM JAN
- UK Retail Price Index YoY JAN
- UK PPI Core Output MoM JAN
- UK PPI Core Output YoY JAN
- UK Core Inflation Rate MoM JAN
- UK PPI Input MoM JAN
- UK PPI Input YoY JAN
- UK PPI Output YoY JAN
- UK PPI Output MoM JAN
- Euro Area ECB Non-Monetary Policy Meeting
- Euro Area Industrial Production YoY DEC
- Euro Area Industrial Production MoM DEC
- Euro Area 6-Month Bill Auction
- Euro Area 3-Month Bill Auction
- Germany 10-Year Bund Auction
- Canada Inflation Rate YoY JAN
- Canada Inflation Rate MoM JAN
- Canada Core Inflation Rate YoY JAN
- Canada Manufacturing Sales MoM Final DEC
- Canada Wholesale Sales MoM Final DEC
- Canada BoC Gov Lane Speech
- US MBA 30-Year Mortgage Rate 11/FEB
- US MBA Mortgage Applications 11/FEB
- US MBA Mortgage Market Index 11/FEB
- US MBA Mortgage Refinance Index 11/FEB
- US MBA Purchase Index 11/FEB
- US FOMC Minutes
- US Retail Sales MoM JAN
- US Export Prices MoM JAN
- US Import Prices MoM JAN
- US Retail Sales Ex Autos MoM JAN
- US Import Prices YoY JAN
- US Export Prices YoY JAN
- US Retail Sales YoY JAN
- US Retail Sales Ex Gas/Autos MoM JAN
- US Industrial Production YoY JAN
- US Industrial Production MoM JAN
- US Manufacturing Production MoM JAN
- US Capacity Utilization JAN
- US Manufacturing Production YoY JAN
- US Business Inventories MoM DEC
- US NAHB Housing Market Index FEB
- US Retail Inventories Ex Autos MoM DEC
- US EIA Crude Oil Stocks Change 11/FEB
- US EIA Gasoline Stocks Change 11/FEB
- US EIA Gasoline Production Change 11/FEB
- US EIA Heating Oil Stocks Change 11/FEB
- US EIA Refinery Crude Runs Change 11/FEB
- US EIA Distillate Stocks Change 11/FEB
- US EIA Cushing Crude Oil Stocks Change 11/FEB
- US EIA Crude Oil Imports Change 11/FEB
- US EIA Distillate Fuel Production Change 11/FEB
- US 20-Year Bond Auction
Thursday, 17, February 2022
- G20 meeting – day 1
- Japan Balance of Trade JAN
- Japan Exports YoY JAN
- Japan Machinery Orders MoM DEC
- Japan Machinery Orders YoY DEC
- Japan Imports YoY JAN
- Japan Stock Investment by Foreigners 12/FEB
- Japan Foreign Bond Investment 12/FEB
- Australia Unemployment Rate JAN
- Australia Employment Change JAN
- Australia Full Time Employment Chg JAN
- Australia Participation Rate JAN
- Australia Part Time Employment Chg JAN
- Euro Area ECB Schnabel Speech
- Euro Area New Car Registrations YoY JAN
- Euro Area ECB Economic Bulletin
- Euro Area ECB Lane Speech
- Switzerland Balance of Trade JAN
- Italy Balance of Trade DEC
- Spain Balance of Trade DEC
- Spain 5-Year Bonos Auction
- Spain 10-Year Obligacion Auction
- France 3-Year BTAN Auction
- France 5-Year BTAN Auction
- Canada Foreign Securities Purchases DEC
- Canada Foreign Securities Purchases by Canadians DEC
- Canada 2-Year Bond Auction
- US Building Permits JAN
- US Housing Starts JAN
- US Philadelphia Fed Manufacturing Index FEB
- US Housing Starts MoM JAN
- US Building Permits MoM JAN
- US Initial Jobless Claims 12/FEB
- US Jobless Claims 4-week Average 12/FEB
- US Continuing Jobless Claims 05/FEB
- US Philly Fed Business Conditions FEB
- US Philly Fed CAPEX Index FEB
- US Philly Fed Employment FEB
- US Philly Fed New Orders FEB
- US Philly Fed Prices Paid FEB
- US EIA Natural Gas Stocks Change 11/FEB
- US Fed Bullard Speech
- US 8-Week Bill Auction
- US 4-Week Bill Auction
- New Zealand PPI Input QoQ Q4
- New Zealand PPI Output QoQ Q4
Friday, 18, February 2022
- G20 meeting – day 2
- Japan Inflation Rate YoY JAN
- Japan Core Inflation Rate YoY JAN
- Japan Inflation Rate Ex-Food and Energy YoY JAN
- Japan Inflation Rate MoM JAN
- France Unemployment Rate Q4
- France Inflation Rate YoY Final JAN
- France Inflation Rate MoM Final JAN
- France Harmonised Inflation Rate MoM Final JAN
- France Harmonised Inflation Rate YoY Final JAN
- Euro Area Current Account DEC
- Euro Area Construction Output YoY DEC
- Euro Area ECB Elderson Speech
- Euro Area Consumer Confidence Flash FEB
- Euro Area ECB Panetta Speech
- Italy Construction Output YoY DEC
- Italy Current Account DEC
- UK Retail Sales MoM JAN
- UK Retail Sales ex Fuel MoM JAN
- UK Retail Sales YoY JAN
- UK Retail Sales ex Fuel YoY JAN
- Switzerland Industrial Production YoY Q4
- Canada Retail Sales Ex Autos MoM DEC
- Canada Retail Sales MoM DEC
- Canada Retail Sales YoY DEC
- Canada ADP Employment Change JAN
- Canada New Housing Price Index MoM JAN
- Canada New Housing Price Index YoY JAN
- US Fed Mester Speech
- US Existing Home Sales JAN
- US Existing Home Sales MoM JAN
- US CB Leading Index MoM JAN
- US Fed Waller Speech
- US Fed Williams Speech
- US Fed Brainard Speech
- US Baker Hughes Total Rig Count 18/FEB
- US Baker Hughes Oil Rig Count 18/FEB
