PremiumEvery Monday, Mint’s Plain Facts section features key data releases and events to look for in the coming week. The week starts with the monthly inflation data for India. The US Federal Reserve will meet this week, and is likely to increase interest rates that could have implications in markets across the world. Here’s what to watch for:
1. India inflation
Retail inflation has been on the rise since September and reached 6.01% in January, with high fuel prices adding to inflation fire despite excise duty cuts. However, a temporary freeze on fuel prices ahead of the Assembly elections in five states despite the rising global crude oil prices is likely to have pulled inflation down in February. Lower food prices and a fading base effect could also help, possibly bringing inflation below the Reserve Bank of India’s 6% upper limit again. The data is due on Monday. The February inflation print will be the latest available figure for the Monetary Policy Committee (MPC) when it meets in April. However, even if inflation cools, it would be hard for the rate-setting panel to ignore the rising price pressures due to the Ukraine crisis, particularly on the crude oil front. All hopes are pinned on another round of excise duty cuts on fuel to tame the inflation in coming months.
2.FOMC meeting
Inflation is raging in the US, reaching a 40-year-high of 7.9% in February. The general consensus is that the inflation is not merely transient: investors across the board are betting on long-term high inflation. The Ukraine crisis is only stoking energy prices further, also causing a headwind to growth. Inflation in March could easily reach 9%.
This twofold challenge—high inflation and uncertain growth—has put the Federal Reserve in a tight spot ahead of its meeting from Tuesday to decide on its rate hike. Fed chair Jerome Powell indicated early this month that the panel will go ahead with the rate hike scheduled for March. A 25 basis point hike is expected.
After the March hike, the Fed is ready to raise interest rates more if inflation does not taper. Emerging markets have been nervous about the impending hikes for months now: if the Fed takes the plunge, it could trigger outflows from EMs like India.
3. Opec report
Opec will release its monthly report on the global crude oil market on Tuesday. Lately, oil producers have been in the spotlight for not ramping up production enough to meet the rebound in fuel demand with easing of the pandemic. The resulting oil price rise has stayed on after Russia’s invasion of Ukraine: oil prices have risen to their highest in over a decade. Still, the Opec+ alliance, which includes Russia, has decided to raise output modestly by 400,000 barrels a day in March.
Last week, the US announced a formal ban on Russian oil imports, stoking further supply concerns. The US has called for an increase in production, but Opec recently said there was insufficient oil capacity to compensate for loss of Russia’s supply. Market participants will hope for an increase in production to help ease oil price rise. The monthly report will recalibrate projections for the year based on the geopolitical realities.
4. Euro area inflation
From deflation to sky-high inflation, the euro area has seen steep price pressures in just over a year, with retail inflation rising to 5.1% in January. The upcoming data for February, set to be released on Thursday, is likely to show further increase in prices. According to the flash inflation figures released by Eurostat, the statistical office of the European Union, earlier this month, inflation rose further to 5.8% in February. The current inflation rate is already about three times higher than the 2% midpoint target of the European Central Bank, and the surging prices of crude oil and food items due to the Ukraine crisis are set to add additional pressures on prices. While the ECB has acknowledged risks to inflation, it is widely expected to make a trade-off with the imminent impact of the crisis on euro area growth as well due to the sanctions imposed on Russia.
5. Pi Day
On Monday, number enthusiasts across the world will celebrate one of the most iconic and most well-known symbols in mathematics: pi. 14 March (or 3/14 in the mm/dd system) is widely celebrated as Pi Day, as it represents 3.14, the value of pi rounded off to two decimal places. The famous physicist, Albert Einstein, was also born on this day.
Pi is the ratio of a circle’s circumference to its diameter, which, much to the wonder of early mathematicians, doesn’t change with the size of the circle. Over the centuries, it has found application in areas ranging from simple geometry to space exploration, and is relevant for anything circular, spherical, or elliptical. Pi is an irrational number, and its decimal places can go on forever. But in everyday use, it is rounded off to two decimal places for convenience. Nerd communities have made it a maths challenge to be able to memorize pi’s digits to record lengths. Expect some pi fun on social media on Monday.
