Powell’s testimony “did clarify his and the Fed’s approach to withdrawing stimulus in 2022 amid increased uncertainty from the Russia-Ukraine conflict,”. Powell sees the maximum employment part of his mandate as largely fulfilled.
“With inflation at a multidecade high, the Fed is anxious to get off of a crisis footing,” while also looking to “cool demand enough to get inflation under control, but not choke off the recovery.”
Comments:
# “It is worth pointing out the great stress he placed, again, on being data-driven and nimble. Whereas a few weeks ago, that might have meant a very dynamic approach to inflation, it is quite likely this now means keeping a close eye on the economic growth numbers, said Jeanette Garretty, managing director at Robertson Stephens Wealth Management.
# “In light of the Chair’s testimony, and events so far this week, we retain our monetary policy outlook, which anticipates five 25bp hikes to the policy rate in 2022, starting in March. We continue to expect a plan for (passive) balance-sheet normalization to be announced in May, and to be implemented in June,” said Barclays economists, led by Michael Gapen.
However, St. Louis Fed President James Bullard said the central bank needs to adopt a more aggressive monetary policy stance to combat surging pricing pressures. Bullard, a voting member of the rate-setting Federal Open Market Committee this year, has consistently called for an aggressive approach to monetary tightening.
While his Chicago counterpart Charles Evans said monetary policy is currently “wrong-footed” and needs to be upwardly adjusted toward neutrality.
Comments from monetary policy makers come as investors also watched headlines from the seventh day of conflict in Ukraine that has seen Russian forces step up shelling of civilian areas.
Russia's week-old invasion has yet to achieve its aim of overthrowing Ukraine's government. Ukrainians said they were battling on in the port of Kherson, the first sizeable city Russia claimed to have seized, while air strikes and bombardment caused further devastation in other cities.
Russia’s invasion was denounced by the United Nations General Assembly, underscoring Moscow’s increasing isolation on the global stage, as U.S. authorities weighed restrictions on imports. The Russian military’s advance continued, while Ukraine said it will take part in a second round of talks with Moscow on Thursday. The U.S. will postpone a Minuteman-III intercontinental ballistic missile test planned for this week to show restraint after President Vladimir Putin raised Russia’s nuclear alert level over the weekend, Pentagon spokesman John Kirby said.
Russian forces penetrated Kherson and have surrounded Mariupol, two key cities in the southern part of the country.
Moscow continued to pound Ukraine’s second-largest city, Kharkiv, on Wednesday, with both sides indicating they were ready to resume talks to end the fighting. The U.N. General Assembly voted on Wednesday to condemn Russia’s Ukraine invasion, while calling for an immediate end to the clashes.
Surging energy prices also were in focus, with U.S. crude oil prices +7.73% settling at $110.60 a barrel on the New York Mercantile Exchange, the highest level in about 11 years, according to FactSet data.
The U.S. and other countries in the International Energy Agency agreed on Tuesday to release 60 million barrels of oil from their emergency reserves, to help with any supply shortfall caused by Russia’s invasion of Ukraine. Also, OPEC+, made up of the Organization of the Petroleum Exporting Countries and its allies, including Russia, offered no surprises at its monthly meeting, quickly agreeing to boost production in April by another 400,000 barrels a day.
“Weather is in our favor over the next few weeks,” said John Carey, director of equity income at Amundi US, in a phone interview, of higher energy costs. “It’s still cold, but at a certain point over the next few weeks, the weather will warm up, so it may not be such an acute problem than it would have been a month ago.”
By: via @AlliesFin Serve Stock Market
