“ECB Meeting…”

On Thursday the European central bank announced its plan to end asset purchases in the third quarter, accelerating its exit from extraordinary stimulus amid soaring inflation. With the growth in prices in the eurozone at record high, policymakers were already pushing for a faster exit from its asset purchases whilst paving the way for an interest rate hike later this year.  Despite the war has challenged such a view, the record rate of February’s prices at 5.8% and the possibility of even higher prices in March increased the pressure on the bank to actively keep inflation at 2%.  In this light, the bank confirmed its plans to wrap up its EUR 1.85 trillion Pandemic Emergency Programme at the end of the month and said purchases under the older and stricter Asset Purchase Programme (APP) will be smaller than previously planned.  It now expects APP purchases to total 40 billion euros in April, EUR 30 billion in May and 20 billion euros in June.  Previously it set purchases at EUR 40 billion in the second quarter, EUR 30 billion in the third quarter and EUR 20 billion in the fourth quarter.  The ECB added that buys in the third quarter will be “data-dependent”.  In a statement the ECB said that “if the incoming data support the expectation that the medium-term inflation outlook will not weaken even after the end of our net asset purchases, the Governing Council will conclude net purchases under the APP in the third quarter.”  Meanwhile, at a news conference ECB Christine Lagarde said that “any adjustment to the key ECB interest rates will take place sometime after the end of our net purchases under the APP (Asset Purchase Programme) and will be gradual.” She further added that, “The Governing Council expects the key ECB rates to remain at their present level until it sees inflation reaching 2% well ahead of the end of its projection horizon, and durably for the rest of the projection horizon.” 

UK Economy

The UK economy has rebounded much more than expected in January, according to data on Friday.  The Office for National Statistics (ONS) said gross domestic product grew by 0.8% month on month in January after a 0.2% decline in December.  This was the strongest monthly expansion since June.  The ONS said that all the main sectors of Britain’s economy grew more than expected, with the wholesale and retail sector as well as pubs and restaurants being particular drivers. Although growth looked likely to continue into February, economists warned of tougher times ahead.  Responding to the data, finance minister Rishi Sunak warned that the Russia-Ukraine conflict had raised uncertainty around the economic outlook and calls for caution.

US Consumer Prices

US consumer prices surged in February reaching the highest annual increase in 40 years.  Inflation is likely to accelerate further in the months ahead amid Russia’s war against Ukraine that is likely to drive up the costs of crude oil and other commodities.  On Thursday the Labour Department said that the consumer price index increased by 0.8% last month after gaining 0.6% in January.  Meanwhile, in the 12 months through February, the CPI shot up by 7.9%, the biggest year-on-year increase since January 1982 compared to the 7.5% increase in January.  Inflation has way exceeded the 2% threshold set by the FED.  Excluding the volatile food and energy components, the CPI increased 0.5% last month after advancing 0.6% in January.  In the 12 months through February, the so-called core CPI climbed up 6.4%.  This was the largest year-on-year gain since August 1982 and followed a 6% increase in January. Meanwhile, a separate report from the Labour Department on Thursday showed that the initial claims for state unemployment benefits increased 11,000 to a seasonally adjusted 227,000 for the week ended 5 March, still at levels consistent with a tight labour market.    

Russia and Ukraine Meet in Turkey

A meeting was held in the southern Turkish resort of Antalya, which was the highest level contact of the two sides since Russia invaded Ukraine on 24 February.  Present at the meeting were the foreign ministers of Russia and Ukraine however, there was no apparent progress towards a ceasefire in the two-week old conflict or on a humanitarian corridor from the southern Ukrainian port of Maiupol which is a southern port where hundreds of thousands of people have been trapped with no access to water, medicine or food.    After the talks, Ukraine’s Dmytro Kuleba said after the talks that his Russian counterpart Serge Lavrov did not commit to either.  The latter reminded Kuleba that Moscow had presented propels to Kyiv, and that Russia wanted to see a demilitarised Ukraine.

Price of Wheat

Since Russia launched its full-scale invasion of Ukraine two weeks ago, prices of wheat, maize and soybean have rocketed to record or close to record levels.  Even prior to the assault by President Vladimir Putin the cost of staples was increasingly rising as demand bounced back from the COVID-19 pandemic.  The Food and Agriculture Organisation’s Food Price Index jumped 21% year-on-year in February.  Since then, the cost of a bushel of wheat has climbed by nearly 80% to above $14.  The exports from Russia and Ukraine account to close to 30% of the world’s traded supplies.  By comparison wheat has traded at around $5 a bushel for most of the last decade.  In 2011, when rising food prices rose amid protests and revolutions across the Arab world, it was around $8. 

Russia

Russia is undergoing the worst crisis since the 1991 fall of the Soviet Union after the West imposed heavy sanctions on almost the entire Russian financial and corporate system after Moscow’s invasion of Ukraine.  Kremlin spokesman Dmitry Peskov cast the sanctions by the West as a hostile act that impacted global markets and he said it was unclear how far the turbulence on global energy markets will go.  Peskov told reporters:  “We see that the situation on energy markets is developing rather turbulently and we don’t know how far that turbulence will go.” He declined to outline the exact nature of Russia’s response.  President Vladimir Putin who held office since 1999, had to hold a meeting with the government on Thursday to discuss minimising the impact of sanctions, said Kremlin.  The attempt by the West to cut off Russia has hit commodity markets and increased the expectation of higher inflation across the world.

Oil

Oil price climbed to their highest levels since 2008 on Monday amid market supply fears as the US and European allies considered banning Russian oil imports. Brent crude reached $139.13 a barrel and US West Texas Intermediate hit $130.5 in early trade with both benchmarks striking their highest since July 2008. Russia is the world’s top exporter of crude and oil products combined, with exports around 7 million bpd, or 7% of global supply. Some volumes of Kazakhstan’s oil exports from Russian ports have also faced some hardships.  Since the beginning of 2022, global oil prices have spiked more than 60% along with other commodities raising fears of stagflation and slow economic growth. On Tuesday US President Joe Biden announced a US ban on Russian oil and other energy imports.  Brent crude climbed by almost 7% to $131.80 a barrel while US crude for April delivery was up 7% at $127.82.  The lower expectations of an imminent return of Iranian crude to global markets have added to upward pressure on prices amid a slowdown in talks between Tehran and world powers over its nuclear activity.  On Wednesday, oil dropped more than 5% to around $121 a barrel as some investors perceived the US Ban on Russian oil may not worsen a supply shock and the head of the International Energy Agency said the agency could further tap oil stocks. 

Unemployment rate for January 2022

A press release dated 3 March 2022 shows that in January, 2022 the monthly unemployment rate was 3.1%, lower by 0.1% in comparison to the previous month.  The unemployment rate for males stood at 3.3% while for females stood at 2.8%.  The unemployment rate during January 2022 for persons aged 15 to 24 years was 8.8% while the rate for those between 25 and 74 years stood at 2.5%.

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