Every Friday, Brian Jacobsen provides perspective on key events and topics of the current week and his thoughts about what the week ahead may hold. Here’s his report for the week of February 26–March 4, 2022. Plus: Since we started a new month this week, there’s a recap of February’s key events.

The week that was

  • Russia’s invasion of Ukraine continued.
  • There were two attempts at “talks” that went nowhere. However, there was an agreement to establish protected routes to evacuate people.
  • Russia fired missiles at the largest nuclear power plant in Europe. The reactor was shut down to prevent a catastrophic event. Russia ended up seizing the plant.
  • Western nations continued to impose stricter sanctions on Russia.
    • The European Union shut its airspace to Russian planes and banned Russian state-owned media companies.
    • The U.S. Treasury Department froze the U.S.-held assets of the Central Bank of Russia. Transactions with the Central Bank of Russia, the Russian National Wealth Fund, and the Ministry of Finance of the Russian Federation are barred except for transactions related to energy exports.
    • Many Western companies announced they will stop doing business in Russia. Russia hasn’t been able to sell as much oil as it used to—despite offering it at a steep discount—because shippers don’t want to transport the oil.
  • Germany and Poland pledged to increase their defense spending. The European Union promised to provide arms to Ukraine.
  • From a purely growth and inflation perspective, our base case scenario is that the Russia-Ukraine situation is protracted, keeping oil and agricultural prices elevated. The drag on growth from high food and energy prices eating into consumers’ budgets is likely to be more pronounced in emerging markets and Europe than in the U.S. The higher prices will benefit oil producers and farmers. While the high prices are uncomfortable, high prices staying high isn’t inflation since inflation requires prices to continue to move even higher. Lower inflation does not require lower prices.


  • Nonfarm payrolls increased a much-larger-than-expected 678,000 in February. Wages were flat, though. Consumer price inflation continued to outpace wage inflation. The COVID-19 recovery was underway—but now, consumers will feel more pain with elevated food and fuel prices stemming from Russia’s invasion of Ukraine.
  • The Russian ruble continued to turn to rubble. Russia’s central bank doubled its target interest rate to 20% to try to prop up the currency. Russians lined up outside of banks to get currency after some Russian banks were cut off from the global banking system.
  • The Institute for Supply Management® (ISM®) survey results for February were mixed. The ISM Manufacturing Index improved with production expanding, but it’s one step forward and one step back for supply-chain pressures as supplier delivery times increased again. The ISM Services Purchasing Managers’ Index showed a slight deceleration in activity with employment contracting and prices-paid rising. But, new orders stayed high, and new export orders increased.
  • The International Energy Agency coordinated the release of 60 million barrels of oil from member countries’ strategic reserves. The Organization of the Petroleum Exporting Countries and Russia said they would follow their original plan of increasing oil output by 400,000 barrels per day. This is, figuratively, just a drop in the bucket and didn’t do anything to help lower oil prices.
  • Federal Reserve (Fed) Chair Powell testified before Congress. In his prepared testimony, he said the Fed is set to hike its target for the federal funds rate when it meets in mid-March. He said inflation is well above 2% and the labor market is strong, so the Fed feels it’s appropriate to hike. He said the “near-term effects on the U.S. economy of the invasion of Ukraine, the ongoing war, the sanctions, and of events to come, remain highly uncertain.” During the question-and-answer portion of his testimony, he said he supports a rate hike of 25 basis points (bps; 100 bps equal 1.00%) in March. He also said it will take three years to shrink the balance sheet to the size the Fed wants for the long term.
  • The Bank of Canada raised its target interest rate by 25 bps to 0.50%. The central bank said to expect more rate hikes in the future.
  • The Fed’s Beige Book said economic activity expanded at a moderate-to-modest pace in January and February. The report noted that business activity was disrupted as “firms faced heightened absenteeism” due to the surge in COVID-19.


  • President Biden delivered his State of the Union address. In it, he said Russian president Vladimir Putin underestimated the willingness and ability of U.S. allies to stick together and impose sanctions.
  • It was reported that China is considering relaxing its zero-COVID-19 policy.
  • President Macron of France announced he will seek a second term in office.

The week to come

  • On Thursday, we get U.S. inflation and hourly earnings data for February.
  • On Tuesday, we get China’s February inflation numbers.
  • On Friday, the U.K. releases its industrial production numbers for January.

The month that was

  • Although it’s the shortest month, February always feels like the longest month.
  • Russia attacked Ukraine. The vast majority of the rest of the world condemned the action. While the people of Ukraine are fighting back, other countries imposed sanctions on individuals and banks in Russia.
  • Purchasing-manager surveys showed a rebound in activity across Europe after COVID-19 restrictions were lifted. The biggest gains were in the services sector.
  • U.S. spending in January rebounded from the drop in December. The rise of the Omicron variant of COVID-19 didn’t seem to drag on spending as much as many feared it would.
  • Fed speakers said they would have to wait and see how the Ukraine situation affects growth and inflation numbers before deciding whether they will alter their intention to hike rates in March. There’s disagreement at the Fed as to the timing of balance-sheet shrinkage and whether rate hikes should be front-loaded or not. The most hawkish faction of the Fed wants to start with a rapid sequence of hikes—getting the federal funds rate target to 1.00% by the middle of the year—and then perhaps throttle back rate hikes as necessary. The more dovish wing of the Fed seems to want to take a more measured approach to hiking rates.
  • There were trucker protests in Canada and other parts of the world over vaccination requirements. In Canada, Prime Minister Trudeau invoked the Emergencies Act to deal with protests, but he later removed the measure as the protests dissipated.
  • The shipment of avocados from Mexico was cut off on February 11 after a U.S. inspector in Mexico received death threats. One week later, the U.S. announced avocado shipments would resume on February 21 after Mexican authorities provided additional safety measures for U.S. inspectors.
  • The U.S. Senate passed a stop-gap funding bill to keep the government funded through March 11.

Thanks for reading, stay informed!

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