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Central banks meeting in the United States, Japan and Britain must tread a fine line between rising inflation and heightened risks to the economic outlook from Russia’s invasion of Ukraine.

Emerging markets, from oil importer Turkey to sanctions-hit Russia, may also have to step up measures to protect their economies from crisis.

Here’s your week ahead in markets:


U.S. Federal Reserve Chairman Jerome Powell testifies during the Senate Banking Committee hearing titled "The Semiannual Monetary Policy Report to the Congress", in Washington on March 3.POOL/Reuters

Markets should finally get a long-anticipated interest rate hike from the Federal Reserve. With inflation at almost 8%, the U.S. central bank looks set to conclude a meeting on Wednesday with a quarter-point rate rise, its first increase since 2018.

A bigger move is no longer expected as Russia’s invasion of Ukraine has sent commodity prices soaring and heightened uncertainty is gripping markets.

So far, market volatility has done little to shift the view that the Fed will grit its teeth and hike rates at a steady pace to tame inflation, even as it risks hurting economic growth.

The Bank of Japan, meeting March 17-18, finds itself with little room for manoeuvre. The war is exacerbating inflation but also hurts an economy still shackled by COVID-19 curbs. The dovish BOJ cannot tighten policy right now, but has no scope to ease either, with stimulus already maxed out.


City workers walk past the Bank of England in London February 13, 2008.Toby Melville/Reuters

The Bank of England is expected to hike rates to 0.75% on Thursday, its third increase since December.

But while inflation is running at more than double the target, investors no longer expect a 0.5% rate rise, though they will watch the bank’s assessment of how the war in Ukraine is affecting the policy outlook.

Soaring commodity prices, turbocharged by the war, mean higher inflation which the BoE will need to counter with even tighter policy. But the economic hit from the crisis also needs to be considered.

As economists warn that British households face the worst drop in their living standards for decades, crucial labour market and earnings data are also out on Wednesday.

1970S, AGAIN?

Active pumpjacks from oil wells are pictured at the Inglewood Oil Field, the largest urban oil field, from the Baldwin Hills Scenic Overlook in Culver City, California on March 10.BING GUAN/Reuters

The oil price surge to 14-year highs near $140 bolsters the argument that the 2020s may shape up like the 1970s.

Note the similarities: a geopolitical event that triggered an oil price shock, soaring inflation that central banks were slow to respond to and risks of an economic slowdown. Banks are ramping up inflation forecasts and slashing GDP estimates; ABN AMRO reckons the energy and commodity shock could last a year.

But there are differences too: organized labour is in less of a position to push for higher wages, while major central banks are inflation-targeters. So far most are sticking with rate-hike plans.

But their job is becoming harder as surging fuel and food prices bite. And if talk of fuel rationing surfaces, comparisons with the 1970s will only get stronger.


Employees work on the production line of American infant product and toy manufacturer Kids II Inc. at a factory in Jiujiang, China June 22, 2021.GABRIEL CROSSLEY/Reuters

Economic stability, China’s top priority, is at risk as Beijing tries to maintain ties with Russia and limit blowback from the war.

Sino-Russian trade has grown sharply this year, but gains would be wiped out if economic links with the West turn sour -- the United States has warned it could penalise Chinese companies boosting trade with Russia.

And the darkening global economic outlook is adding to months-long strains for Chinese factories from worldwide supply chain snags.

Data in the days ahead will be watched closely. They include total social financing numbers, a broad measure of credit in the economy which hit a record last month, and bank loan growth.

China is already turning on the monetary taps as top leaders emphasise the need for stability. That should continue.


A money changer holds Turkish lira and U.S. dollar banknotes at a currency exchange office in Ankara, Turkey Dec. 16, 2021.CAGLA GURDOGAN/Reuters

For some developing economies, soaring commodity and energy prices are a boon. But for others, they are a new headwind.

Turkey’s central bank, faced with inflation above 50%, increasingly costly energy imports and a plunge in Russian tourist revenues, meets on Thursday.

Brazilian policymakers who have already lifted benchmark rates by nearly 10 percentage points over the past 12 months meet on Thursday. Indonesia sets rates the same day.

Russia’s central bank is in the toughest spot. Having more than doubled the key rate to 20% following the Ukraine invasion, it meets on Friday. Annual inflation surpassed 10% in the week to March 4 but the deepening economic recession severely limits its options.

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