| Amir Kahanovitz, Chief Economist of Phoenix-Excellence
US intelligence estimated on Friday (again) that the Russians are close to invading Ukraine, and the markets were surprised again, the index fell by 3%.
Until that moment they probably thought the Russian army on the border was just waiting a few weeks for a huge exercise or something, setting up field hospitals to treat all those victims of the exercise, taking the Russian embassy staff in Kiev on a vacation they had long asked for, blocking Ukraine’s Black Sea ports To protect them from sea corks that are typical of the world.
Commentators estimate that an invasion will result in a price reaching $ 120. Why really it will not already be priced in the market? If so, then as time goes on and Russia does not invade Ukraine, it is impossible not to wonder if it is achieving anything in this. For, even without invading it manages to pull the price of oil that is important to it up, it shows Europe who the boss is, how dependent it is on its gas, blackmails the US into negotiations and exposes the weakness of the NATO alliance. That is, even without invading, Russia achieves the world status that Putin wanted to achieve by invading.
Despite the US threats of severe sanctions, it should be remembered that Russia is too big and important for Europe to be under effective sanctions. Bottom line, it’s hard to see the fire in Ukraine spreading too much. Unless perhaps President Biden tries to force her to set her on fire to divert the fire of inflation from home.
| Some interest rate hikes that the market will price, the Fed will have to add another one
It was reported on Thursday that annual US inflation had accelerated to 7.5% and further cracked the status and credibility of the Federal Reserve, which had previously claimed it was temporary.
If the market is pricing an interest rate hike in March, the Fed will need two; If the market prices four interest rate hikes this year, it will need five. If the market is priced to start rising in March, it will have to start first. But every time he advances a step, the market makes two.
On Thursday, before the threat of a Russian invasion of Ukraine, the markets already reflected a yield on US bonds above 2%, with drama mainly in the short parts, which began to embody this year 7 interest rate hikes with a probability of 60%, a double hike in March (50 n. B) At a 70% probability, and even a 25% chance of raising a surprise before March, though that doesn’t make sense, because the Fed is still committed to the bond program this month. That is, until inflation is achieved, the Fed and the market will continue to chase one another, even when the end is known.
| The Federal Reserve was forced to sacrifice growth for its credibility
The yield curve slopes in the U.S. are falling apart. The negative slope continues to approach the short-term highs. At the end of the week, the gap between the yield was 10 years and fell for the first time in the current cycle to a negative level, and the gap between 7 and 5 years dropped to 7 lbs from the zero line. The last line of defense, two years to 10 years, is already 43 lbs. Only and close to overturning within a few months.
Recall that an inverted crooked slope says one thing: the Fed is on the verge of a monetary error, which is likely to rise in growth hurt, but this is probably the inevitable tragic end of the interest rate cycle. Day by day, the long MMA is becoming more attractive.
| The economic plan includes measures that will affect inflation
The Israeli government’s plan is engineered so that everyone can find something they like and something they do not.
The plan includes a series of steps in opposite ideological directions. The people on the economic left will like the part related to the electricity subsidy (3.4% increase instead of 5.7%), the reduction of income tax for the weaker sections (through an increase in the work grant by 20%) and the increase in the subsidy for afternoon classes in clusters 4-5.
The people on the economic right will love the reduction of tariffs (among other things, on some of the food products, car spare parts and raw materials for industry) and the fact that the tax credit points for children will also be given to the upper deciles.
In terms of growth the measures will all be positive in the short term, but since most of them are not due to streamlining or increasing competition, their cost will ultimately come at the expense of the future. However, committing to a large public debt may detract from the future temptation to inflate the public sector, which is something positive.
In terms of e, the program includes many influential but cross-cutting measures, as a question of curbing inflation more immediately compared to those that support an increase in demand through increasing disposable income. Increasing disposable income will mainly put pressure on the housing section, but will come with a more significant delay.
The author is the Chief Economist of Phoenix-Excellence. This review is provided as a service to readers only, and should not be construed as an offer, recommendation, substitute for the reader’s professional judgment or investment advice or investment marketing, purchase and / or sale and / or holding of the securities and / or financial assets mentioned or of securities and / Or any other financial assets