[Daily Outlook] OPEC+ will meet next week to discuss March output
Powell supports raising interest rates in March, not ruling out a rate hike at each meeting:
Federal Reserve Chairman Jerome Powell said the central bank is ready to raise interest rates in March and does not rule out raising interest rates at each future policy meeting to combat inflation at multi-decade highs. Powell said in an online news conference on Wednesday that “if conditions permit, the Committee considers raising rates at its March meeting,” but noted that officials have not yet made any decisions on the policy path because of the need to remain flexible. The Federal Open Market Committee (FOMC) said in a statement on Wednesday that with inflation well above 2 percent and a strong labor market, the committee believes that the right time to raise the target range for the federal funds rate will come soon. The Fed said in a separate statement that the balance sheet reduction will start after the rate hike begins, but has yet to make a final decision on the pace and timing of the balance sheet reduction. The recent turbulence in the stock market, the U.S. inflation rate has repeatedly surprised the market, and it is currently as high as 7%, the highest level since the 1980s. The tight labor market has pushed the unemployment rate down faster than expected and is now close to pre-pandemic levels.
Inflation in New Zealand rose to highest level since 1990 in Q4:
Inflation in New Zealand rose to its highest level in more than 31 years in the fourth quarter, bolstering bets that the central bank will keep raising interest rates. Consumer prices rose 5.9% in the fourth quarter from a year earlier, Statistics New Zealand reported on Thursday, up from a 4.9% rise in the third quarter and economists’ median forecast of 5.7%. Consumer prices rose 1.4% QoQ in the fourth quarter, also above the median forecast of 1.3%. Overnight Federal Reserve Chairman Jerome Powell said he supports raising interest rates in March to rein in high inflation. The Reserve Bank of New Zealand raised its benchmark interest rate in the fourth quarter and signaled further rate hikes. The New Zealand dollar was little changed against the dollar after the inflation data, at 66.51 US cents at 10:49 am Wellington time. The Reserve Bank of New Zealand will hold a policy meeting on February 23, and investors expect a 25 basis point rate hike to 1%.
The U.S. goods trade deficit rose to a record high in December, as consumer goods pushed total imports to a record:
The U.S. goods trade deficit unexpectedly widened to a record high in December, as imports continued to rise, outpacing exports. Commerce Department data on Wednesday showed the trade deficit rose to $101 billion in December from a revised $98 billion in November, beating expectations of all economists polled by Bloomberg. The data is not adjusted for inflation.
The Bank of Canada unexpectedly left rates unchanged, but suggested a rate hike was imminent:
The Bank of Canada left its benchmark interest rate unchanged but signaled it could tighten monetary policy in the coming weeks in a bid to contain inflation, which has reached its highest level in three decades. The Bank of Canada left its main policy rate unchanged at 0.25%, citing economic uncertainty caused by a resurgence of the virus. In a policy statement on Wednesday, they dropped a pledge not to raise borrowing costs and said the economy appeared to have fully recovered from the pandemic, a possible clue that the bank plans to adjust interest rates at its next meeting on March 2.
German government downgrades economic growth forecast as virus-induced recovery delays:
The German government expects economic growth this year to be weaker than previously forecast, as the latest wave of coronavirus infections dampens activity at a time when companies are just starting to see supply chain bottlenecks ease. The German government lowered its economic growth forecast for 2022 to 3.6 percent from a forecast of 4.1 percent in October. The country’s economy ministry said the year had been a particularly challenging start for the services sector, but the recovery should accelerate this year. “We will continue to provide assistance programs for businesses and extend the temporary furloughs policy while the economic rebound remains difficult,” Economy Minister Robert Habeck said on Wednesday. “With vaccination rates rising, it should soon be possible to contain the outbreak in a sustainable manner and reduce crisis aid. The economic recovery will then accelerate significantly.”
OPEC+ will meet next week to discuss March output and is expected to stick to a modest increase as planned:
Representatives from the Organization of the Petroleum Exporting Countries (OPEC) and its allies expect the alliance to stick to earlier plans to approve another modest output increase next week to meet a rebound in oil demand. Officials from about half of OPEC+ countries said the 23-member coalition led by Saudi Arabia and Russia is likely to approve a 400,000-barrel-a-day increase in March. They requested anonymity because the information is not public. OPEC+ has insisted on a monthly gradual increase in output since the agreement was reached in July last year. Whether the alliance can actually add these supplies to the market is less clear. The resumption of production suspended during the epidemic began to face capacity constraints, and many countries failed to meet production targets due to insufficient investment, armed conflict and other reasons. According to OPEC+ data, it completed only two-thirds of its pre-set output increase last month, with Nigeria, Angola and Russia all missing the mark. OPEC+ will meet online on February 2 and make a decision.
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