Hour of Reckoning on Russia Fallout Menaces Markets: Eco Week

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In the span of an hour on Thursday, another super-sized US inflation print and Europe’s first major central bank decision since Russia’s invasion of Ukraine will test investors trying to gauge the fallout of the war on the global economy.

US consumer prices probably jumped 7.9% in February from a year ago, just as energy costs spiked in advance of the conflict, according to the median forecast in a Bloomberg survey of economists. That would be the largest annual surge since the start of 1982.

Just before those figures are released, the European Central Bank will reveal its initial monetary policy response to the Russian invasion. Officials previously keen to exit emergency stimulus at a time of record inflation might avoid rushing to do so amid uncertainty on the growth impact, even as prices rise even further.

The US Federal Reserve, which will not deliver a decision until the following week, might tread carefully too. Chair Jerome Powell has now backed a quarter-point interest-rate hike this month, saying in congressional testimony that Russia’s attack was causing risks to both inflation and the growth outlook.

The International Monetary Fund has warned that the ongoing war and associated sanctions will have a severe impact on the global economy.

This week’s massive rally in commodities prices underscores the war’s effect on global inflation. The cost of crude, metals and grains soared, as raw materials staged their most stunning weekly surge since 1974 and the days of the oil crisis.

These developments will continue to further extend to consumers as they fill up their vehicles, shop at grocery stores and pay their heating bills. Thursday’s US CPI report may reflect a portion of the war-led spike in commodities.

Other US data in the coming week include figures on January job openings and March consumer sentiment. There are no scheduled Fed speeches as the central bank enters its pre-meeting blackout period.

What Bloomberg Economics Says:

The war in Ukraine is moving rapidly – too rapidly for the European Central Bank to have a clear sense of how monetary policy should be altered in response at its next meeting on March 10. Bloomberg Economics expects the Governing Council to stick to the path it previously set out – at least for now. ”

–David Powell and Maeva Cousin. For full analysis, click here

Elsewhere, Russian inflation may show a further surge, South Korea will hold a presidential election, and the UK economy probably had a small expansion in January.

Click here for what happened last week and below is our wrap of what is coming up in the global economy.


South Koreans will elect a new president, with conservative former prosecutor Yoon Suk-yeol currently leading in polls in the race for the Blue House.

The winner will take the helm of Asia’s fourth-largest economy and one of the world’s key chip suppliers. Runaway housing prices, high personal debt and yawning income gaps are among the issues that could push Koreans to switch from the ruling party and its candidate, Lee Jae-myung.

In Japan, the latest wage data is likely to underline the scale of the challenge faced by Prime Minister Fumio Kishida as he tries to lift pay.

Japan also releases revised growth figures for the last quarter that are likely to show a stronger rebound, although omicron, supply snags and Russia’s invasion of Ukraine could tip the economy back into reverse this quarter.

In Australia, RBA chief Philip Lowe speaks twice and is likely to reinforce his message of patience on interest rates amid low wage growth and geopolitical instability.

China’s National People’s Congress started Saturday, with around 3,000 delegates meeting in Beijing for annual legislative meetings. It’s the biggest political event before a twice-a-decade party leadership reshuffle slated for the second half of the year.

At the meeting, China set a growth goal for 2022 of 5.5%, the lowest in more than three decades but above consensus forecasts and the current IMF projection of 4.8%.

China will also release trade data on Monday and inflation numbers on Wednesday.

Europe, Middle East, Africa

A first glimpse of the inflation shock threatening Russia’s economy amid unprecedented global sanctions will emerge in February data due Wednesday. Economists predict an acceleration to 9.15%. While that would be the highest since early 2016, it’s only a foretaste of what’s likely to transpire.

Elsewhere in the region, data Wednesday may show Hungarian inflation at 8.5% in February, while a Czech reading the next day might exceed 10% for the first time in almost a quarter century.

Concurrently, the Czech Republic’s austerity-minded coalition is set to approve a revised 2022 state budget as its plans to cut pandemic-era deficits are confronted with economic fallout from Ukraine.

Aside from the ECB, other central banks in the region responding to the altered landscape of war include those of Poland, which has been seen raising its rate by a half point to 3.25%, and Serbia, whose officials may stay on hold amid mounting pressure to hike.

Data in the euro region include numbers pointing to the strength of Germany’s manufacturing base at the start of the year, encompassing both factory orders and industrial production. Economists predict a monthly increase for each report.

In the UK, monthly gross domestic product data may show only a small increase in January after a decline in December, a legacy of the impact of the omicron variant of the coronavirus that prompted restrictions at the end of last year.

South African data on Tuesday will likely show the economy grew 4.8% in 2021 and 1.6% in the final quarter. The expansion was probably crimped by travel bans right before its summer holiday season during the nation’s short, sharp omicron wave, as well as surging gasoline prices.

On Wednesday, data from Ghana will probably show inflation in February breached the top of the central bank’s target band of 6% to 10% for a sixth straight month, adding to the case for a rate hike. On the same day, Mauritius’ central bank is expected to keep its key rate on hold to support the recovery.

Latin America

Chile on Monday kicks off a busy week for the region with monthly trade data, including copper exports, followed by the much anticipated February reading of consumer prices on Tuesday. Above-target inflation that shows few signs of abating has traders expecting another 150 basis-point central bank rate hike this month.

In Mexico, manufacturing and industrial output reports for January are expected to show some slowing, while same-store sales are unlikely to notch a third straight double-digit increase. On Wednesday, look for inflation to have quickened in February after cooling slightly in December and January.

Like Mexico, Brazil this week confronts the uncomfortable reality that consumer prices did not peak in November as hoped but in fact accelerated for a second month in February. Forecasts are clustered around 10.5%, up from 10.06% in December. Look for negative prints from January industrial production and retail sales reports.

Argentina reports construction activity and industrial production, but both will be overshadowed by the battle to get the country’s staff-level accord with the International Monetary Fund through congress.

On Thursday, look for Peru’s central bank to raise its key rate for an eighth straight meeting, the longest stretch under its chief, Julio Velarde, who took up his post in 2006.

(Updates with China growth target.)

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