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This week, oil and other commodity prices climbed as the U.S. announced it would ban Russian energy imports and President Biden called for eliminating Russia’s “most favored nation” trading status, pushing average gas prices in the U.S. to new record highs. With prices rising this fast, even higher inflation could be in store for U.S. consumers, after the Bureau of Labor Statistics (BLS) reported that its February index of consumer inflation showed prices jumped to a fresh 40-year high.
Against this backdrop, the Federal Reserve is widely expected to raise interest rates at the two-day Federal Open Market Committee (FOMC) meeting that begins on Tuesday, and although Fed Chair Jerome Powell previously stated he would support a quarter-percentage-point rate hike, he said the central bank would closely monitor the impacts of developments in Ukraine. Investors can also expect producer inflation figures, retail sales data, and key updates on the U.S. housing market.
Key Takeaways
- The Fed’s two-day FOMC meeting begins on Tuesday.
- The BLS will release its February Producer Price Index on Tuesday.
- The U.S. Census Bureau reports on February retail sales on Wednesday.
Events Calendar:
Monday March 14:
- GitLab (GTLB), and Zhihu (ZH) report earnings.
- China Industrial Production (February)
- China Retail Sales (February)
Tuesday March 15:
- Smartsheet (SMAR) and Dole (DOLE) report earnings.
- Federal Reserve’s FOMC Meeting begins
- New York Empire State Manufacturing Index (March)
- U.S. Producer Price Index (February)
Wednesday March 16:
- Lennar Corporation (LEN) and Williams-Sonoma (WSM) report earnings.
- Federal Reserve Press Conference
- U.S. Retail Sales (February)
- NAHB Housing Market Index (March)
- Japan Industrial Production (January)
Thursday March 17:
- Accenture (ACN), FedEx (FDX), Dollar General (DG), and Warby Parker (WRBY) report earnings.
- U.S. Housing Starts and Building Permits (February)
- U.S. Industrial Production (February)
Friday March 18:
- U.S. Existing Home Sales (February)
Raising Rates
The FOMC’s highly-anticipated policy meeting begins on Tuesday, with a press conference scheduled for Wednesday. In remarks earlier this month, Fed Chair Jerome Powell took the unusual step of saying ahead of the meeting that he would support a 25-basis-point rate hike to combat inflation. However, expanding sanctions and other economic penalties against Russia will likely raise price pressures, and central bankers will be forced to weigh the risks of rising inflation with the possibility of a sharp economic downturn if rates are raised too quickly.
Producer Prices
The BLS will release its February Producer Price Index (PPI) on Tuesday, and we’ll find out whether prices also surged for producers like they did for consumers. The consensus estimate is for a 0.9% monthly rise, and year-over-year gain of 10%, up from 9.7% in January. Earlier this week, the BLS reported that its Consumer Price Index (CPI) rose 7.9% year-over-year in February, the highest rate since 1982. Some economists are projecting that rate could be close to 9% for March.
Slowing Sales
The U.S. Census Bureau will release its February retail sales report on Wednesday, which is expected to show a dramatic decline in sales growth, from a 3.8% rise in January to just a 0.4% gain last month. Sales excluding autos are expected to climb 1% compared to a 3.3% jump in January, as consumers scale back in response to higher prices. On Friday, the University of Michigan reported its Consumer Sentiment Index fell to its lowest level since 2011, as inflation expectations rose to a 41-year high.
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