Brian Jacobsen provides perspective on the Russia-Ukraine conflict and other key topics of the current week—plus, his thoughts about what the week ahead may hold. Here’s his report for the week of March 12–18, 2022.

The week that was

Russia-Ukraine update:

  • Actions:
    • Russia continued to expand its strikes against Ukraine toward Ukraine’s western border. On Sunday, a Russian missile strike killed 35 people at a training base 15 miles from the border with Poland. Russia has continued to attack hospitals and civilian areas.
    • In a show of solidarity, the prime ministers of the Czech Republic, Poland, and Slovenia traveled to Ukraine’s capital to meet with Ukraine’s President Zelensky.
    • Ukraine launched a counter-offensive to push Russian forces away from key cities, including Kyiv. After President Zelensky gave a video address to Congress, President Biden announced the U.S. will provide drones to Ukraine.
    • Russia reiterated threats to attack convoys transporting arms into Ukraine.
  • Sanctions:
    • Russia has been holding up an Iran nuclear deal, wanting exemptions from sanctions as a condition of approval. The U.S. said that, instead, it will just negotiate with Iran without Russia’s involvement.
    • Reportedly, Russia has asked China to provide weapons for Russia’s war on Ukraine. China’s foreign minister said, “China is not a party to the crisis, nor does it want sanctions to affect China.”
    • Russia imposed sanctions on President Biden and other U.S. officials, including prohibiting them from traveling to Russia.
    • The U.S. House of Representatives voted to end normal trade relations with Russia. This allows the U.S. to impose tariffs on goods imported from Russia.
    • Russia sent its payments on dollar-denominated bonds to the U.S. bank that’s acting as payment agent on the bonds, avoiding a default.
  • Negotiations:
    • On Tuesday, President Putin said Ukraine is not serious about finding a mutually agreeable solution, but then on Wednesday, a Kremlin spokesperson said if Ukraine agrees to be neutral and retain its own armed forces, then that could be viewed as a “certain kind of compromise.”
    • Despite the marginally positive tone, the Kremlin says the parties are far apart. Putin stepped up his vitriolic rants against foreigners.
    • President Biden spoke with China’s President Xi, telling him that the U.S. will impose costs on China if Beijing supports Russia.

Federal Reserve: 

  • The Federal Reserve (Fed) went full hawkish with its policy statement and projections recognizing the risks of higher inflation and lower growth due to Russia’s invasion of Ukraine. Meeting participants submit their views on various economic projections and what they think is the right path for monetary policy. This is in the Summary of Economic Projections and is referred to as a “dot-plot” because their views are displayed as dots on a chart. St. Louis Fed President Bullard was the dissenter. His dot in the dot-plot is the one that has the Fed hiking to 3.125% by the end of the year. So, he’s quite the outlier.
    • With a big downshift in growth expectations and a big ramp-up in inflation projections, the Fed’s pendulum has swung from being overly sanguine about inflation to being perhaps a touch too vigilant.
    • With the dot-plots, everyone on the Fed Board (voters and nonvoters) submit their projections. Nine of them expect 25-basis-point (bp; 100 bps = 1.00%) hikes at every meeting or fewer. Seven expect at least one 50-bp hike. It’s hard to tell who is who, but the voters are probably less antsy to hike.
    • Balance-sheet reduction is likely to start at the May meeting. By that point, assuming food and fuel prices come off the boil, Fed members can change their rate-hike projections back to more measured expectations. March’s inflation number (released in April) will likely be the worst. Food and fuel will likely push up the monthly change by at least 70 bps. That could be a 70-bp drag on the April number.
    • In Fed Chair Powell’s press conference, he said the Fed will be aware of the broader context of financial markets and the economy. He reiterated how strong the economy is and that he thinks there’s a very low risk of recession even with the Fed’s rate hiking and high food and fuel prices. Chair Powell said that the Fed projections have effectively caught up with what the market was pricing. So, Fed officials may figure that as long as the market is pricing in a certain pace of rate hikes, they may as well follow the market’s lead.


  • In pursuit of its zero-COVID-19 policy, China shut down the industrial cities of Shenzhen and Changchun (along with other important cities) to stop COVID-19’s spread.
    • This has added to the pain felt by investors in some Chinese technology companies. A big drawdown in some Chinese tech shares began around the time the U.S. Securities and Exchange Commission said it might delist U.S.-listed Chinese tech shares that were not complying with accounting rules. The possibility that these companies are tied too closely to Russia has also cast a cloud over their futures.
    • The decline in Chinese equities broadened and deepened until China’s government promised to implement policies to spur growth, to hasten the reforms of the property and tech sectors, and to aid in getting companies to comply with foreign accounting rules.
    • On Thursday, President Xi told the Politburo Standing Committee (the decision-making body for the Chinese Communist Party) to lessen the impact on the economy and people’s lives from the control measures.
  • During January and February, China’s industrial production grew 7.5% year over year while retail sales increased 6.7% year over year. Because of the timing of the Chinese New Year, economists typically look at the January and February data together rather than looking at the months separately. It was a much stronger start to the year than many expected.
  • Oil prices fell as traders began betting on some sort of truce between Russia and Ukraine and as China shut down some cities over COVID-19 outbreaks, which could dent demand. Libya, a member of the Organization of the Petroleum Exporting Countries (OPEC), urged OPEC to increase output.
  • Japan was hit by a 7.3-magnitude earthquake off the coast of Fukushima.
  • U.S. retail sales rose 0.3% in the month of February. January’s number was revised from +3.8% to +4.9%. Excluding vehicles and gasoline, January’s sales rose 5.2% while February’s sales fell 0.4%. Industrial production rose 0.5% in February, and manufacturing output rose 1.2%. There was a large increase in the output of business equipment and construction equipment.
  • Brazil’s central bank hiked its target interest rate by 100 bps to 11.75%. That makes nine meetings in a row in which the central bank hiked its target rate. It said it expects to hike again in May.
  • The Bank of England (BoE) hiked its target rate by 25 bps to 0.75%. The bank said inflation will likely rise to at least 8% but will then fall back toward its 2% target over the next couple of years. In the policy statement, the BoE struck a more balanced tone regarding the likelihood of hikes later this year.
  • The Bank of Japan maintained its monetary policy stance at its Thursday meeting. It revised its growth forecast down and its inflation forecast up for the year.


  • Iran fired missiles Sunday. The missiles landed near a U.S. consulate in northern Iraq. Iran claimed it was in retaliation for an Israeli airstrike in Syria that killed two members of Iran’s Revolutionary Guard.
  • Senator Joe Manchin (D-West Virginia) said he will not support the nomination of Sarah Bloom Raskin to the Fed Board. She withdrew her nomination.
  • North Korea fired a ballistic missile on Wednesday. South Korea’s military said the missile failed by exploding shortly after launch.
  • Germany’s cabinet approved 200 billion euros in additional borrowing to help modernize the country’s military.

 The week to come

  • Fed Chair Powell gives a speech on Monday about the economic outlook. On Wednesday, U.S. new-home sales numbers for February are to be released.
  • Outside the U.S., U.K. inflation numbers for February come out on Wednesday. On Thursday, results from various U.S. purchasing manager surveys come out to give a read on business activity for March.

Thanks for reading, stay informed!

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