Written by Shane Balkham.
The continued threat of a Russian invasion into Ukraine kept markets volatile last week. Tensions were heightened as Russian military exercises, together with their ally Belarus, saw shelling along the border with Ukraine. Inevitably, there were casualties on the Ukraine side of the border.
Fears rose that these exercises were the prelude to a full-scale invasion, as the number of troops amassed on the border reached 190,000. Mediation was given one final chance, with President Macron suggesting to Vladimir Putin, over a telephone call, of holding a Ukraine Summit to discuss security and strategic stability in Europe. This was on the condition that Russia does not invade Ukraine.
The situation does appear to be at an inflection point, one in which diplomacy could still end up being the winner, although there is much at stake and all out conflict is still a valid and likely scenario.
Another battle that is brewing is with the Federal Reserve and its fight with inflation. Promising to raise rates and start its quantitative tightening policy next month, the officials at the US Central Bank have a little over three weeks to set out their forward guidance, in order not to surprise markets.
Traditionally, before the Federal Reserve meets, its officials embark on a series of meetings to deliver the message of what can be expected from future monetary policy. It is an almost cast-iron certainty that rates will be raised by the Federal Reserve, but what is unknown is the pace and path of these future hikes.
Expectations have already violently swung this year, from three hikes in 2022 to six, as well as some Fed officials calling for a half-percent hike in March. Be prepared for plenty of rhetoric as the US Central Bank looks to dampen demand in order to tackle inflation.