Global Markets expect tighter policies from the Federal Reserve

Introduction

Welcome viewers to our weekly news updates. Our article today talks about the market sentiment on further interest rate hikes and tensions among Russia and its western counterparts.

Federal Reserve

Fed Chairman Jerome Powell vows to take stringent action on inflation, which has consistently posed a threat.
With today's circumstances, the traditional interest rate hike of 25 basis points may not cut it. The Fed has indicated that they will continue to raise the rates to 50 basis points to control the spiralling inflation.
(FOMC) Federal Open Market Committee officials indicate that the 25 basis points are likely to stay, at least for the remaining six meetings of the year. However, polls of market opinion show a 50% chance of the next rate hike taking place somewhere in May.
The contractionary policy comes with the (CPI) Consumer Price Index figures running at 7.9% over a 12-month basis. Chairman Powell attributes the inflation pressures due to Covid that has affected the supply chain of goods and services.
Furthermore, Powell indicates that the Russia-Ukraine war has contributed to additional unwanted pressures on the global supply chain and inflation. The Fed, under general circumstances, will review different types of events and not alter policy.
On Monday, Powell spoke to the (NABE) National Association for Business Economics, indicating that May could see the start of reductions in the central bank's $9trillion balance sheet, which increased during the pandemic in efforts by policymakers to bolster the economy.
The trimming of the Fed's portfolio of Treasuries and mortgage-backed securities would place downward pressure on inflation.

Russia-Ukraine

Thursday (24th of March) marks one month since the invasion of Ukraine.
Russian President Vladimir Putin has been warned by western nations that his country's actions will pay "ruinous" costs for the invasion during a one-day meeting between Nato, G7, and EU summits.
Ukrainian President Zelenskiy hopes that there will be "meaningful steps" being taken during the summits, identifying allies, partners, and enemies.
The US said it would announce a package of Russia related sanctions against political figures and oligarchs on Thursday.
Russian President, in retaliation, has plans to demand payment in roubles for its gas sales to "unfriendly" countries. The announcement has created a shock as it exacerbates the looming energy crisis.

Gold

Gold has been fluctuating around $1,911 - $1941/ounce since last week. Prices Thursday morning has indicated that gold may be out of the woods as it rallies further despite the hawkish stance of the Federal Reserve.
The yellow metal seems to be underpinned by market participants despite the Fed's increasing odds of higher interest rates. However, the aggressive contractionary policies of the Fed has failed to control gold prices.