“Federal Reserve Meeting…”

On Wednesday the FED raised interest rates for the first time since 2018.  It also laid down an aggressive plan to push the borrowing costs to restrictive levels next year to cover the economic risks arising from high inflation, the war in Ukraine and the coronavirus pandemic.  The Federal Open Market Committee kicked off the move to tighten monetary policy with a quarter-percentage-point increase in the target federal funds rate, increasing the key benchmark from quasi-zero levels.  New Fed projections even showed policymakers ready to combat inflation more aggressively.  Fed Chair Jerome Powell after the end of the latest two-day policy meeting, said the economy is strong enough to weather the rate hikes and maintain its current strong hiring and wage growth, and that the FED needed to now focus on limiting the impact of price increases on American families.  Despite the actions being taken, inflation is expected to remain above the FED’s 2% target through 2024, and Powell said officials would not shy from raising rates more aggressively.  In a news conference, Powell said, “the way we are thinking about this is that every meeting is a live meeting” for a rate hike.  He further added that “We’re going to be looking at evolving conditions, and if we do conclude that it would be appropriate to move more quickly to remove accommodation, then we’ll do so.”  Increases in interest rates slow inflation by reducing the demand for items such as housing, automobiles or home improvement projects that would become more expensive to finance, hence slowing economic growth and possibly increase unemployment.  FED policy makers have also reduced their gross domestic product growth forecasts for 2022 to 2.8%  from a 4% estimate in December.  Powell said, “That is just an early assessment of the effects of spillovers from the war in Eastern Europe, which will hit our economy through a number of channels.”  “You are looking at higher oil prices, higher commodity prices. That will weigh on GDP to some extent.”  Meanwhile, the FED’s preferred measure of inflation currently is increasing at 6% annual rate.  After the release of the statement, the two year Treasury note yields (US2YT) rose to 2.002% while the 10 year Treasury yields (US10YT) reached 2.246%, both at high levels since May 2019, before dropping back to 1.948% and 2.188% respectively.  Meanwhile, in its new statement the Fed said that it expects to begin reducing its nearly $9 trillion balance sheet “at a coming meeting.” Powell told reporters that policymakers had made “excellent progress on that front and could finalize details at their next policy meeting in May.  

China’s economy

China’s economy improved in the first two months of 2022, as indicated by key indicators that exceeded analysts expectations.  However, a weak property sector, the increased number of Omicron cases and heightened global uncertainties are weighing on the outlook.  On Tuesday data from the National Statistics Bureau showed that industrial output rose 7.5% in January-February from a year earlier, the fastest pace since June, 2021 and up from a 4.3% increase seen in December.  Retail sales have expanded by 6.7% year-on-year amid rising demand during the Lunar New Year holidays and Winter Olympic Games. The strong numbers came after the growth lost some of its lacklustre throughout last year due to the liquidity crunch in the property sector and the measures that impacted consumption.

US Producer Prices

US producer prices increased strongly in February as the cost of goods like gasoline surged and further gains are expected amid the Russia’s war against Ukraine.  With war crude oil and other commodities have become more expensive.  The Labour Department’s report on Tuesday gave more evidence that inflation is to remain high in the coming months although underlying price pressures at the factory gate rising moderately last month.  The producer price index for final demand increased 0.8% after accelerating 1.2% in January.  Goods prices increased by 2.4%, the largest gain since December, 2009, after rising 1.5% in January. A 14.8% jump in wholesale gasoline prices accounted for nearly 40% of the increase in goods prices.  Gasoline prices rose 3.3% in January, while food prices increased by 1.9% last month.  Meanwhile, services were unchanged after increasing 1% in January.  The PPI climbed 10% in the 12 months through February, matching the gain in January.

EU approves new round of sanctions for Russia

On Tuesday the European Union approved a number of new sanctions against Russia that includes the banning of investments in Russian Energy Sector, luxury goods exports and imports of steel products from Russia.  The sanctions came into force after publication in the EU official journal later on in day, and include the freezing of assets of more business leaders who support the Russian state, including Chelsea football club owner Roman Abramovich.  In a statement on Tuesday, the European Commission stated that the sanctions include “a far reaching ban on new investment across the Russian energy sector.”  Such measures impact Russia’s major oil suppliers such as Rosneft, Tansneft and Gazprom, however, EU members will still be able to buy oil and gas from them, according to an EU source.  The EU executive said, there will be a ban on transactions with some Russian state-owned enterprises that are linked to the Kremlin’s military-industrial complex.  According to the Commission, the ban on Russian steel imports is estimated to impact EUR 3.3 billion worth of products.  Other measures include banning the export of luxury goods worth more than EUR 300, including jewellery while exports of cars costing beyond EUR 50,000 will be banned.  Furthermore, EU credit rating agencies cannot issue ratings for Russia and Russian companies.  The latest sanctions include the freezing of assets of the Russian central bank and the exclusion from the SWIFT banking system of some Russian and Belarusian banks.  The EU has further agreed to remove Russia of its “most-favoured nation” trade status, opening the door to tariffs on Russian goods.

Oil

Oil prices dropped about 8% on Monday the lowest in two weeks as efforts between Ukraine and Russia looked as if they would end their conflict.  Brent futures dropped 7.7% to $104.03 a barrel, while US West Intermediate crude dropped 8% to $100.59.  Both have climbed since Russia’s invasion of Ukraine and are up roughly 34% so far this year.  Brent and WTI recorded their most volatile 30 days since June, 2020. WTI had it most volatile month in April 2020 when prices turned negative, while Brent experienced its most volatile month in January 1991 during the Persian Gulf War.  On Tuesday OPEC said that oil demand in 2022 faced challenges from Russia’s invasion of Ukraine and the increase in inflation as crude prices soar.  In its monthly report, OPEC has maintained its view that the global demand for oil will rise by 4.15 million barrels per day (bpd) in 2022 and increased its forecast of global demand for its crude.  However, just a month ago it raised the possibility of a more rapid demand increase in 2022, and said that the war in Ukraine and worries over the pandemic could have a negative short-term impact on global growth.  OPEC declared, “While the year started on relatively solid underlying footing, the latest events in Eastern Europe may derail the recovery.”  Meanwhile, oil prices tumbled more than 6% on Tuesday to their lowest levels in almost three weeks, as Russia suggested it would allow a revival of the Iran nuclear deal to go forward and as traders were worried about the pandemic lockdowns in China that could reduce demand.  Wednesday saw oil losing ground for the fifth time in the last six days as traders reacted to possible progress in the talks between Russia and Ukraine and a surprisingly increase in US inventories.  The global benchmark Brent traded between $97.55 and $103.70 before settling at $98.02 down 1.9% while the US West Texas Intermediate (WTI) crude ended down 1.5% at $95.04 a barrel.  According to the International Energy Agency (IEA) on Wednesday, three million barrels per day of Russian oil and products may not find their way to market in the beginning of April amid the invasion of Ukraine.  The IEA said in its monthly oil report, “We see a reduction in total exports of 2.5 million bpd, of which crude accounts for 1.5 million bpd and products 1 million bpd.” Furthermore, it projected lower Russian domestic demand for oil products. 

Malta:  Residential Property Transactions – February 2022

A press release dated 11 March, 2022 shows that the number of final deeds of sale relating to residential property amounted to 1,050 during February, 2022 representing a 6.7% increase when compared to those registered a year earlier.  The value of these deeds amount to EUR 247.2 million, 26.2% higher than the corresponding value recorded in February, 2021.  The highest number of final deeds of sale were recorded in the region of Ghawdex, and the region of Haz-Zabbar, Xghajra, Zejtun, Birzebbuga,  Marsaskala and Marsaxlokk at 175 and 136 respectively.  Conversely, the lowest number of deeds were noted in the region of Birgu, Isla, Bormla and Kalkara and in the region of Imdina, Dingli, Rabat, Imtarfa and Imgarr.  In these two separate regions the deeds recorded were 15 and 35 respectively.  Meanwhile, in February 2022, 967 promise of sale agreements related to residential property were registered equivalent to a 28.4% drop over the same period last year.   

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