Brian Jacobsen provides perspective on the Russia-Ukraine war 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 May 21–27, 2022.

The week that was

  • The minutes from the Federal Open Market Committee (FOMC) meeting on May 3‒4 shed some light on the committee’s hopes, dreams, and plans.
    • All FOMC members supported shrinking the Federal Reserve’s (Fed’s) balance sheet. A number of them agreed that after the balance sheet has shrunk for a while, it might be appropriate to sell the Fed’s holdings of mortgage-backed securities. Several members warned about risks in markets as the balance sheet shrinks.
    • Most members supported 50-basis-point (bp; 100 bps equal 1.00%) hikes at the next two meetings. There could, however, be a pause after those moves. The minutes said this “expedited removal of policy accommodation would leave the committee well positioned later this year to assess the effects of policy firming and the extent to which economic developments warranted policy adjustments.” So, front-loading rate hikes could give them some space to take a breather.
    • FOMC members, as they typically do, said valuations of many assets remained elevated. They made particular note of commercial real estate. When it comes to housing, they said prices had risen rapidly, but they noted this was not a “debt-fueled” housing boom.
    • The minutes said the FOMC is going to be “data dependent” and focused on getting inflation back to 2% “while sustaining strong labor market conditions.” As time goes on and rates move higher, that could become an increasingly tougher balancing act. Interestingly, the minutes said FOMC members want to “move expeditiously to a more neutral monetary policy stance.” That means policy is still accommodative and they actually may be hoping they don’t have to get too restrictive too soon.

Russia-Ukraine update:

  • Actions:
    • A Russian soldier was found guilty of premeditated murder in Ukraine’s first war-crimes trial.
    • Russia is stepping up attacks on areas of the Donbas to try to dominate the region.
    • Ukrainian forces continued to repel Russian forces from the city of Kharkiv, though Russia has continued shelling the city.
  • Sanctions:
    • Russia cut off gas exports to Finland.
    • Russia will have to pay its dollar-denominated debt in rubles as the U.S. waiver that allowed dollar payments expired.
    • President Putin promised citizens a higher minimum wage and more benefits for military personnel. The country’s central bank cut rates even though inflation is running very hot.
  • Negotiations:
    • Speaking by video at the World Economic Forum, Ukraine President Zelensky reiterated his calls for embargoes on Russian oil, technology, and other trade.
    • President Putin said Russia could allow grain and fertilizer exports if some sanctions on Russia are lifted.


  • European Central Bank (ECB) President Lagarde said that by the third quarter, the eurozone’s economy will likely be in a position where the ECB can move its policy rate into positive territory.
  • The U.S., Australia, Brunei, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand, and Vietnam created the Indo-Pacific Economic Framework for Prosperity. The framework focuses on the digital economy, supply chains, clean energy, and effective tax/anti-corruption efforts.
  • Monkeypox is hitting the headlines. It’s a virus that historically was mostly found in Nigeria, the Democratic Republic of the Congo, and the Central African Republic. Smallpox vaccines have been found to be 85% effective against the virus, and the virus is not easily spread among humans.
  • China’s Premier Li Keqiang said China is facing economic difficulties that are more challenging than what the country experienced in 2020 during the initial outbreak of COVID-19. He called on officials to make sure the unemployment rate falls and that the economy “operates in a reasonable range.” On Monday, the State Council of the People’s Republic of China revealed various support measures, like tax rebates, relief on social insurance payments by businesses, and loan relief.
  • The Reserve Bank of New Zealand hiked its policy rate by 50 bps, to 2.0%. The central bank said the policy rate could hit 4.0% over the next year. The Bank of Korea also hiked its policy rate while increasing its inflation forecast.
  • Personal income and spending rose more than expected in April. Inflation came in at 6.3% year over year. Excluding food and energy, inflation was 4.9% year over year.


  • President Biden said the U.S. would defend Taiwan militarily if invaded by China. White House spokespeople quickly said he misspoke. The U.S. has a “strategic ambiguity” approach to the Taiwan-China relationship: The U.S. is supportive of the “One China” policy (in which Taiwan is part of China) but also supportive of Taiwan’s independence under the Taiwan Relations Act. Under the Taiwan Relations Act, the U.S. provides Taiwan with the military means to defend itself, but the U.S. does not actually intervene.
  • President Biden said the U.S. is considering lifting tariffs on Chinese imports to help lower prices.
  • North Korea test-fired an intercontinental ballistic missile and two shorter-range ballistic missiles.
  • The Australian Labor Party won a slim majority in the Parliament of Australia. Prime Minister Scott Morrison conceded defeat on Saturday, May 21. On Monday, May 23, Anthony Albanese was sworn in as Australia’s 31st prime minister.
  • Shanghai is on track to start reopening in June after being shut down for two months. COVID-19 cases in Beijing rose to a record number, raising worries about whether China will shut down the capital.
  • U.S. and Taiwan officials will hold talks to deepen economic ties. China will not like that.
  • U.K. Chancellor Rishi Sunak said the government will impose a windfall tax on energy firms. The chancellor earmarked the funds to help finance a support package to help households with their energy bills. The long-term effects of windfall taxes tend to deter investment in the targeted industry.

The week to come

  • U.S. markets are closed on Monday, May 30, for Memorial Day, but there are plenty of data being released on Monday anyway. Germany’s May inflation numbers are coming out Monday morning while China’s purchasing manager survey results for May are to be released Monday evening.
  • On Wednesday in the U.S., the Institute for Supply Management (ISM®) Manufacturing Index for May will be out, and on Friday, the ISM Services Purchasing Managers’ Index will be released. Also on Friday, we’ll get the May employment situation report.
  • The Bank of Canada has a policy meeting on Tuesday.

Thanks for reading, stay informed!

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