By Noreen Burke
Investing.com -- Concerns over tensions between Russia and Ukraine together with uncertainty over how aggressively the Federal Reserve is going to raise interest rates look set to dominate market sentiment in the week ahead. Wednesday’s Fed minutes may provide a sense of how quickly policymakers want to move, while appearances by several Fed officials will also be parsed for clues. The U.S. data calendar features January figures on producer prices, which will be closely watched after data last week showing consumer prices hit their highest in 40 years last month. Meanwhile, earnings season is ending, but not before a last flurry of reports. And the U.K. is to release a string of economic data that looks set to keep the Bank of England on track for more rate hikes. Here’s what you need to know to start your week.
Geopolitical tensions
Wall Street’s three main indexes closed sharply lower on Friday after the White House warned that a Russian attack on Ukraine could begin any day. While stocks got hit, prices for Treasuries, the dollar and other safe-haven assets, such as gold rose.
Crude prices also surged as the prospect of sanctions on Russia, a top producer, added to fears over already tight global supplies.
Some analysts believe soaring crude prices could exacerbate already high inflation, adding to pressure on the Fed to raise rates more aggressively.
“By pushing energy prices even higher, a Russian invasion would likely exacerbate inflation and redouble pressure on the Fed to raise interest rates,” said Bill Adams, Chief Economist for Comerica Bank, in a note cited by Reuters.
“From the Fed’s perspective, the inflationary effects of a Russian invasion and higher energy prices would likely outweigh the shock’s negative implications for global growth,” he said.
Fed minutes, speakers
With markets already pricing in a strong chance the Fed will hike rates by half a percentage point at its upcoming March meeting, Wednesday’s minutes from the Fed's January meeting, will be scrutinized for any indications on how big a move officials are contemplating.
Last month Fed Chair Jerome Powell flagged a March lift-off and said there was “quite a bit of room” to raise interest rates without threatening the recovery in the labor market.
On Friday, Goldman Sachs said it now expects seven quarter percentage point rate hikes this year, up from its previous forecast of five, as it updated its forecast following Thursday's U.S. CPI data.
Several Fed officials are due to make appearances this week that will also be closely watched. St. Louis Fed’s Bullard and Cleveland Fed President Loretta Mester are to speak on Thursday. On Friday Fed Governor Lael Brainard speaks, as do New York Fed President John Williams, Fed Governor Christopher Waller and Chicago Fed President Charles Evans.