Central banks are grappling with inflation and falling stocks are feeling the heat, leaving investors wondering where the so-called “Fed put option” has gone. Minutes of meetings of the world’s top policymakers could shed some light, as central banks in New Zealand and South Korea grapple with how big their rate hikes need to be to keep pace with the Fed. And Washington holds the key to a Russian sovereign default as a key deadline approaches.

Here’s your look at the week ahead with Ira Iosebashvili in New York, Kevin Buckland in Tokyo and Dhara Ranasinghe, Saikat Chatterjee and Karin Strohecker in London.


Can the Federal Reserve tame the worst US inflation in decades without dragging the economy into a recession? The minutes of the May 25 bank meeting will offer clues. Chairman Jerome Powell is confident the Fed can pull off a “soft landing” — words that are hardly comforting to stock markets as recession warnings from major Wall Street banks pile up. After raising rates by 75 basis points since March, the Fed is expected to raise another 50 basis points in July.

Powell pledged to raise rates as high as needed to keep inflation under control. The minutes will show how stubborn policymakers expect inflation to be and whether growth is resilient enough to cope with much tighter monetary policy.


Wall Street background. Major stock indices are in the throes of a bear market with the S&P 500 down around 19%, the high-flying Nasdaq down more than a quarter from a November 2021 high. And there is no no respite in sight: Barclays and Goldman predict further difficulties for equities as corporate margins suffer from soaring inflation. The sellout is widespread. Since the peak of the bull bond market in March 2020, a 30-year constant-duration US Treasury bond has lost half its value, and safe-haven gold is down 6% this quarter. Rising volatility means that even hardened stock pickers are hesitant to take big bets.

Retail and institutional investors are also bearish. An index of retail investor sentiment in the United States is near a March 2009 low, as fund managers post their highest levels of cash since September 2011.


Forward-looking Purchasing Managers’ Index (PMI) data from the US, Australia, Britain, Japan and the Eurozone is worth looking at. And more than usual, with central banks caught between soaring inflation and its impact on consumers amid a darkening growth outlook, hurt by COVID lockdowns in China and the war in Ukraine. . China recovered quickly from an initial pandemic slump in 2020 thanks to bumper exports and factory production, but the current downturn may be more difficult to overcome.

Entrenched in their fight against inflation, policymakers could reach a turning point in the coming months where they will have no choice but to focus on the risk of recession. The PMI indices have held up well recently, but could show how close this turning point is.


They were the first to act, but the race is on for central banks in New Zealand and Korea to stay ahead of a Fed hot on their heels with some significant hikes. The Reserve Bank of New Zealand is widely seen as raising rates again by half a point on Wednesday to tame inflation as risks to the economy mount, with recent buyers feeling the pain of the rate hike mortgages.

Korea’s new central bank governor shook markets by signaling a half-point hike ahead of its first meeting on Thursday. Falling behind the curve could compress the fragile won, sending imported food and energy prices soaring. One of the few remaining holdouts, Bank Indonesia, is expected to stay put a bit longer when it meets on Tuesday.

5/ RUSSIA FACES DEFAULT, AGAIN The prospect of a Russian sovereign default is back given a deadline for a US license allowing Moscow to make payments expiring on May 25 and $100 million interest a few days later.

Russia’s $40 billion in sovereign bonds are just one of the flashpoints after its Feb. 24 invasion of Ukraine triggered sanctions and sweeping countermeasures from Moscow. It is also urgent to know whether gas will continue to flow to Europe as companies struggle to confirm how they can legally buy gas if they have to pay in rubles with payments due from May 20. The EU advised companies against opening ruble accounts, but refrained from saying it would violate its sanctions against Moscow. Russia supplies around 40% of the EU’s gas.

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