Breaking News
Investing Pro 0
Extended Sale! Save on premium data with Claim 60% OFF

Take Five: Putting central banks to the test

Published Feb 14, 2022 02:45AM ET Updated Feb 14, 2022 02:50AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: Raindrops hang on a sign for Wall Street outside the New York Stock Exchange in Manhattan in New York City, New York, U.S., October 26, 2020. REUTERS/Mike Segar
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio

(Reuters) -Markets now appear to be gunning for a big U.S. rate hike in March, so Federal Reserve minutes and policymaker comments in the days ahead will be the key focus.

European and Japanese bond markets may keep testing policymakers' resolve to contain rising borrowing costs, UK data could shed some light on the Bank of England's next move, and shuttle diplomacy will endeavour to avert a war in Ukraine.

Here's your week ahead in markets from Ira Iosebashvili in New York, Kevin Buckland in Tokyo, Sujata Rao, Karin Strohecker and Dhara Ranasinghe in London.


After U.S. inflation posted its biggest annual increase in 40 years in January, markets are pricing in a strong chance the Fed will hike rates by half a percentage point in March.

Minutes from the Fed's January meeting, due on Wednesday, may already appear outdated. Nonetheless, edgy markets will scour them for signals on how big a move rate-setters are contemplating.

The Fed last month flagged a rates lift off for March and also reaffirmed bond purchases will end then. The minutes may provide a sense of when, and how quickly, the Fed might reduce its balance sheet, which roughly doubled to nearly $9 trillion during the pandemic. 

On the corporate front, chipmaker Nvidia (NASDAQ:NVDA) and retailer Walmart (NYSE:WMT) will be among those reporting earnings.


    If markets needed a reminder about who's in charge, the Bank of Japan was happy to comply, saying it would buy an unlimited amount of 10-year bonds at 0.25% and underscoring its resolve to prevent borrowing costs rising too high.

Japan's 10-year bond yield has hit a six-year peak every day for a week, rising to 0.23%, just 2 bps off the BOJ's tolerance limit.

As the relentless rise in bond yields worldwide rippled out to Japan, some suspect the global trend towards monetary tightening could spur a shift at the dovish BOJ.

The bond market intervention shows that's some way off. Governor Haruhiko Kuroda continues to pledge extraordinary support for the economy, the latest reading on which is out Tuesday.

3/ ECB 'PUT'

Just as the BOJ steps in, the European Central Bank, it appears, may allow borrowing costs to rise as it focuses on inflation.

Southern European 10-year bond yield premiums over Germany are at the widest since mid-2020; Italy's spread is 20 bps wider from levels seen before the hawkish ECB pivot on Feb. 3

Yes, the periphery is in a stronger position to cope, thanks to low debt refinancing costs and the EU recovery fund.

But a potentially faster-than-anticipated unwinding of the stimulus that has long buffered the periphery is a big deal, and the ECB 'put' could be put to the test

The term, normally used to describe the Fed's backstop for stocks, refers to the ECB's willingness to tolerate rising yields that could tighten financing conditions and raise fragmentation risks. Markets are right to feel nervous.


It's a big data week in Britain with latest employment figures out Tuesday, inflation data on Wednesday and retail sales Friday.

They're in focus because the Bank of England just delivered back-to-back rate rises for the first time since 2004, trebled wage growth forecasts and predicted inflation to peak above 7%. Markets price another 130 basis points in hikes by year-end.

Data last month showed a 4.1% unemployment rate for the three months to November, the lowest since June 2020; new hirings surged by a record amount in December.

Consumer prices, meanwhile, accelerated in December to near 30-year highs of 5.4% and may only peak in April when households face energy bill hikes of up to 50%.

While December shopping was hit by Omicron-linked curbs, latest retail sales may also show consumers' mood being soured by inflation, lofty energy bills, higher rates and tax hikes.


Shuttle diplomacy is at fever pitch to prevent tensions between Moscow and the West tipping over into a full-blown conflict around Ukraine.

After French President Emmanuel Macron's visit, German Chancellor Olaf Scholz will see Ukraine's President Volodymyr Zelenskiy on Monday, before heading to Moscow to meet Russia's Vladimir Putin. Poland's foreign minister is due in Moscow too, and NATO holds a defence ministers summit in Brussels Wednesday.

While Russian troop build-up near Ukraine's border continues and Western powers send military to Europe's eastern fringes and ready sanctions on Moscow, markets seem to be focusing on other issues such as central banks and inflation.

The coming days may show whether the flurry of diplomacy improves international ties and keeps Russian energy into Europe.

Take Five: Putting central banks to the test

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your profile, will be public on and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email