“FED Chair Jerome Powell…”

Fed Chair Jerome Powell said on Wednesday that the Federal Reserve will move forward with plans to raise interest rates this month to try to tame high inflation, however, the war in Ukraine has made the outlook “highly uncertain” for US central bank policymakers.  He reiterated that high inflation and an “extremely tight” labour market warrant high interestrates. Powell said, “We expect it will be appropriate to raise the target range for the federal funds rate at our meeting later this month,” and that the FED will follow later this year with reductions to its $8.5 trillion portfolio of government securities.  However, in his statement to lawmakers, Powell gave no hint about how fast the FED may need to go with its policy tightening, said FED officials. He also said that the coronavirus pandemic’s impact on the economy appeared to be easing and hiring remains strong and inflation had emerged as a main risk. Inflation “is running well above our longer-run objective of 2%.  Demand is strong and bottlenecks and supply constraints are limiting how quickly production can respond,” Powell said.  However, Powell also acknowledged the issues that can arise from the situation in Europe that could possibly not only rise inflation, but also undercut growth. 

US Weekly Jobless Claims

The initial claims for state unemployment benefits dropped 18,000 to a seasonally adjusted 215,000 for the week ended 26 February, said the Labour Department on Thursday.  It was the second straight weekly decline in claims.  With a near record 10.9 million job openings at the end of December, companies are holding on to their workers.  Claims have dropped from a record high of 6.149 million in early April 2020. Tight labour market conditions are fuelling wage growth, which is adding to inflation pressures.  

Sanctions on Russia

Russian authorities are facing increasingly harsh sanctions imposed by Western nations since Moscow invaded Ukraine last Thursday.  The measures range from curbs on the central bank’s ability to use its gold and foreign exchange reserves to the exclusion of big Russian banks from the international financial system.  A plunge in the rouble on Monday to an all-time low forced the central bank to hike its key interest rate to 20% and requested exporting companies to sell forex to support the currency. 

Russia’s Prime minister said on Tuesday that Russia will temporarily stop foreign investors from selling Russian assets so as to base their decisions not only on political pressure.  A government decree showed that Russia’s huge sovereign wealth fund will also be pressed into action, to buy shares in Russian companies, amounting to about USD 10.3 billion.

Fitch, Moody’s Slash Russia Sovereign Rating

Russia had been downgraded by Fitch and Moody’s by six notches to “junk” status stating Western sanctions caused uncertainty over the service of debt and would weaken the economy.  Russia’s financial markets are in turmoil amid the sanctions imposed over its invasion of Ukraine.  The invasion triggered credit rating moves and warnings about the impact of Russia’s economy such as that of S&P last week, which lowered Russia’s rating to junk status.  Furthermore, it also prompted index providers FTSE Russell and MSCI to announce on Wednesday that they will remove Russian equities from all their indexes. Fitch downgraded Russia to “B” from “BBB” and placed the country’s ratings on “rating watch negative”.  Moody’s has also cut the country’s rating by six notes to B3 from Baa3. Russia has responded to the sanctions with measures to enhance its economic defences and retaliate against the Western restrictions. 

US Private Payrolls – February

Private payrolls increased by 475,000 jobs last month, the ADP National Employment Report showed on Wednesday.  Employers added 509,000 jobs in January rather than laying off 301,000 workers as was initially reported. While the report suggested the economy was on solid footing as the COVID-19 infection numbers started easing, however, some economists cautioned about the credibility of the report after the sharp upward revision to January’s data.  The ADP report is jointly developed with Moody’s Analytics and was published ahead of the Labour Department’s more comprehensive and closely watched employment report for February on Friday. 

Retail Price Index – January 2022

A press release dated 28 February, 2022 shows that in January, the annual rate of inflation as measured by the RPI was 3.88% up from the 2.59% in December, 2021. The largest upward impact on annual inflation was measured in the Food Index (1.49%). 

Gross Domestic Product – 2021

A press release dated 1 March 2022 shows that provisional estimates indicate that the Gross Domestic Product (GDP) for 2021 amounted to EUR 14,533.8 million registering an increase of EUR 1,473.9 million or 11.3% in comparison to 2020.  Meanwhile, in volume terms, GDP rose by 9.4%, following the drop of 8.3% registered a year earlier as a result of the pandemic. 

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