Written by Millan Chauhan.

Last week, the Federal Open Market Committee decided on Wednesday to hold interest rates at 0.25%.  Following the announcement, we saw the US 10-year bond yield reach 1.87% which is often a proxy used to discount company valuations. This saw US markets sell-off, having opened higher at the start of the day, which illustrates how sensitive markets are to new information and ultimately how volatile markets have become.

Despite interest rates being held still, the Federal Reserve did signal that a rate hike of 0.25% may be likely in March 2022 which would be the first time the Fed has raised rates since 2018.  The Federal Reserve still remains committed to keeping inflation at the 2% target and, with the US inflation rate at 7% in December 2021, there are expectations that a sequence of rate hikes is likely to occur for the rest of 2022.

Tensions between NATO and Russia remain high, and a solution has yet to be agreed.  Russia has recently deployed roughly 100,000 troops on Ukraine’s borders, prompting warnings from the West that there would be consequences if they were to invade its pro-Western neighbour.  Boris Johnson is set to speak to Russian President Vladimir Putin virtually and subsequently visit eastern Europe in the coming days as the UK increases its diplomatic efforts.  Johnson has offered NATO a further 900 troops for deployment in Estonia and Foreign Secretary Liz Truss has said that Russian oligarchs will be faced with severe sanctions should Russia invade Ukraine.

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