Facing both turbulent financial markets and raging inflation, the Federal Reserve will soon need to raise interest rates, for the first time in more than three years, as part of a broader tightening of historically easy monetary policy.

Sell-off in global stocks is “far from over” as investors started to price in recession. Any relief rally on hopes of Russia and Ukraine's tension to ease should be a selling opportunity, not a sign of bottoming.

Before the Russia and Ukraine crisis, jitters on energy supply shortage and inflations have already introduced huge volatility into stocks and bonds. Sanction on Russia and its retaliation would drastically distort the global supplies and elevating inflation could sustain throughout the second quarter at least. The yield curve in many developed markets is flattening, the possibility of inversion should not be ruled out in 1st half, and that points to a recession picture.

Also, Eurozone could enter into a recession this year if Russia were to escalate the retaliation. The bloc’s reliance on Russian gas supplies means there is no way the eurozone can find substitutes. Rising energy prices and supply shortages will undoubtedly drag on the economic activities in the region.

The stocks market may find little support from the FOMC meeting this week. The latest US CPI has hit 7.9%, which would only force the Fed to contain inflation as a priority, not growth or financial stability. The Fed is likely to follow the ECB’s meeting last week, stressing more on tackling the inflation, with no hints on pausing tightening even with rising volatility recently. CPI may approach 9% in the coming months. US jobs report recently shows that Omicron has little impact on the labour market, putting a 50bp hike in May on the table.

Powell said there is quite a bit of room to raise interest rates without threatening the labour market. After being up strongly earlier, the major stock market averages turned negative shortly following Powell’s pronouncement.

The committee’s statement came in response to inflation running at its hottest level in nearly 40 years. Though the move toward less accommodative policy has been well telegraphed over the past several weeks, markets in recent days have been remarkably choppy as investors worried that the Fed might tighten policy even more than expected.

A recent post-meeting statement from the Federal Open Market Committee did not provide a specific time for when the increase will come, despite indications that it could happen as soon as the March meeting.

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