The former head of the Fed criticizes the current US central bank policy. RBNZ to raise rates more aggressively

Investors’ fears of a slowdown in the US economic growth increased after New York's manufacturing activity fell by 36.2 points to -11.6 in May. Former Federal Reserve Chairman Ben Bernanke said that current Fed leaders have been too slow in responding to rising US inflation and as a result have faced a period of stagflation (a combination of stagnant growth and high inflation). According to Bernanke, Powell and his colleagues decided to respond to rising inflation gradually because they did not want to shock markets with a repeat of the so-called tantrum in 2013 when Treasury yields rose sharply under his leadership. At the same time, he warned that the result of this slow reaction would be poor economic performance.

US stock indices traded yesterday without a single trend. At the close of the stock market yesterday the Dow Jones index (US30) increased by 0.08%, while the S&P 500 index (US500) decreased by 0.39%. The NASDAQ Technology Index (US100) fell by 1.20%.

US retail sales and industrial production data will be released today. Retail sales are expected to increase over the last month. If the estimates come true, it will be an encouraging sign that consumers want to stimulate the recovery through increased spending despite rising consumer prices. Industrial production levels are also expected to rise, as US manufacturing has shown a steady rise for several months, despite constraints.

Major European indices also traded without a single trend on Monday. German DAX (DE30) decreased by 0.45%, French CAC 40 (FR 40) lost 0.23%, Spanish IBEX 35 (ES35) gained 0.19%, British FTSE 100 (UK100) added 0.63%. The latest UK labour market estimates for January-March 2022 showed that the unemployment rate decreased during the quarter (3.8% → 3.7% for the last month), while the employment rates increased. The number of job openings from February to April 2022 rose to a new record of 1,295,000. However, the rate of job growth continues to slow. Jobless claims fell by 56.9 thousand. A strong labour market along with high inflation will encourage more aggressive monetary policy from the Bank of England.

Germany plans to stop importing Russian oil by the end of the year anyway, whether or not the European Union succeeds in negotiating a pan-European oil ban in the next set of sanctions against Russia. Russia's share of German oil consumption has already fallen from about 35% before the war in Ukraine to 12%.

Turkey will vote against Sweden and Finland joining NATO, Erdogan said.

Oil prices added another 3% as OPEC suppresses any meaningful production increases. Saudi Energy Minister Abdulaziz bin Salman said the lack of refining capacity in the United States and other countries means gasoline and other oil products will remain expensive, even if exporters pump more crude. Fuel prices in the United States have hit a record high since last week, with gasoline costing more than $4.50 and diesel at about $6. In addition to a shortage of refining capacity, fuel demand expected ahead of the peak summer travel season is driving energy prices to unprecedented levels.

Asian markets closed in green territory on Monday despite fears of a global rise in inflation. Japan's Nikkei 225 (JP225) gained 0.45%, Hong Kong's Hang Seng (HK50) added 0.26% on Monday and Australia's S&P/ASX 200 (AU200) was up +0.25%.

New Zealand's Central Bank will raise interest rates by a half percent at each of its next three policy meetings to deal with rising inflation, Westpac Banking Corp. said. The Reserve Bank will raise the official interest rate to 2% at its May 25th meeting and then hold two more related hikes in July and August, said Michael Gordon, acting chief economist of New Zealand. The interest rate is expected to peak at 3.5% later this year.

The minutes of the Reserve Bank of Australia's May monetary policy meeting showed that the Australian economy is supported by household and corporate balance sheets and a strong labour market also. The rise in inflation is largely due to global factors. At the same time, it is noted that the RBA representatives considered the possibility of raising the interest rate by 40 bps in May. The next RBA meeting will be held on June 7, where analysts expect to see a 0.4% interest rate hike.

Main market quotes:

S&P 500 (F) (US500) 4,008.01 -15.88 (-0.39%)

Dow Jones (US30) 32,223.42 +26.76 (+0.083%)

DAX (DE40) 13,964.38 -63.55 (-0.45%)

FTSE 100 (UK100) 7,464.80 +46.65 (+0.63%)

USD Index 104.23 -0.34 (-0.32%)

Important events for today:
  • – Australia RBA Meeting Minutes (m/m) at 04:30 (GMT+3);
  • – UK Average Earnings Index (m/m) at 09:00 (GMT+3);
  • – UK Claimant Count Change (m/m) at 09:00 (GMT+3);
  • – UK Unemployment Rate (m/m) at 09:00 (GMT+3);
  • – Eurozone Italian Consumer Price Index (m/m) at 12:00 (GMT+3);
  • – Eurozone GDP (q/q) at 12:00 (GMT+3);
  • – US FOMC Member Bullard Speaks at 15:00 (GMT+3);
  • – US Retail Sales (m/m) at 15:30 (GMT+3);
  • – US Industrial Production (m/m) at 16:15 (GMT+3);
  • – Eurozone ECB President Lagarde Speaks at 20:00 (GMT+3);
  • – US Fed Chair Powell Speaks at 21:00 (GMT+3);
  • – US FOMC Member Mester Speaks at 21:30 (GMT+3).

by Justforex, 2022.05.17

We advise you to get acquainted with the daily forecasts for the major currency pairs.

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

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