Macroeconomics: The Day Ahead for 7 April

Yesterday’s stark warning from the Ukrainian government asking civilians to evacuate Kharhkiv and the Donbas regions, while the government was still able to help make this happen ‘in an organised way’, ‘because later the people will be under fire and face the threat of death’ serves as a reminder that the war is becoming more entrenched and even more brutal and barbaric. Meanwhile the EU’s struggle to reach an agreement on stopping coal imports from Russia, let alone far far more significant oil and gas hardly reflects well, and suggests a fall back to long standing divisions and hesitancy.

The day’s schedule of data is unlikely to have much in the way of impact, with Australian Trade and German Industrial Production to digest, ahead of Eurozone Retail Sales, US weekly jobless Claims and Mexican CPI. On the central bank front, the “account” of the March ECB policy meeting shares top billing with the BoE’s annual conference on Sovereign Bond Markets, at which Chief Economist Pill will be the keynote speaker, with a good many Fed speakers also on tap. Following on from yesterday’s unexpectedly sharp 100 bps rate hike to 4.50% in Poland (rates were just 0.1% back in August), the focus turns to Serbia’s NBS, whose policy rate is generally very  closely tied to the ECB’s, but in the face of CPI running ay 8.8% y/y and set to rise further, the NBS is seen hiking 25 bps to 1.25%, having been forced to intervene in FX markets to prop up the weak Dinar, suffering both from outflows to pay for a seasonal increase in energy, along with the fall-out from the war in Ukraine. Otherwise there are multi-maturity debt auctions in France (EUR 11.5 Bln max) and Spain (EUR 6.25 Bln max). The FOMC minutes underlined the Fed’s hawkish tilt, given that a 50 bps rate hike was only avoided due to the economic uncertainty related to the Ukraine war, as well as a clear admission of being ‘behind the curve’. The balance in terms of Fed’s QT balance sheet rundown of $60 Bln Treasuries and $35 Bln MBS (the prior proportion would have meant (60/30) also hints strongly at wanting to exercise some restraint on soaring house prices, though in fairness only at the margin.

** ECB – ‘Account’ of March policy meeting **

–  The ‘account’ of the ECB meeting should offer some insights into why the statement changed the wording on the timing of af an initial rate hike from ‘soon after’ to ‘some time after’ the end of QE, while at the same time sharply accelerating the QE taper, even if last week’s CPI surge may well have altered the opinions of the most diehard doves. It should also shed some light on any possible pivot back to focussing on weaker prospective growth and labour demand, and the extent to which the council believes that fiscal policy and other legislative measures are / will be critical to energy (and to a lesser extent food) price pressures.