The main event of this week will be the minutes of the US Federal Reserve’s March meeting, which will be scrutinized on Wednesday, amid widespread expectations of a half-percent interest rate hike next month. Along with concerns over the economic impact of monetary tightening, events surrounding the Ukraine conflict will remain in the spotlight. While the stock market has ignored concerns about the growth outlook, the bond market has set off alarm bells. The European Central Bank will also release its minutes and the Reserve Bank of Australia will meet. Meanwhile, oil prices will remain in focus after the sharpest weekly decline in 2 years. Here’s what you need to know at the start of the week.

1. Fed minutes

Minutes from the Federal Reserve’s March meeting on Wednesday will provide investors with an update on how officials view the outlook for U.S. monetary policy and may include more details on plans to shrink the central bank’s $9 trillion balance sheet.

The Fed raised rates by a quarter percentage point last month, the first step in a cycle of monetary tightening aimed at curbing inflation, which is now at its highest level in four decades. After the March meeting, several Fed officials, including its head Jerome Powell, said they were prepared to raise rates more tightly to prevent high inflation from taking hold.

Friday’s jobs report paved the way for the Fed to raise the Fed Funds rate by half a percentage point at its next meeting on May 4.

Several Fed officials are also scheduled to speak during this week, including Fed Governor Lael Brainard, Minneapolis FRB Governor Neel Kashkari, New York FRB Governor John Williams and St. Louis FRB Governor James Bullard.

2. The bond market is burning red

The closely watched portion of the U.S. Treasury yield curve inverted again on Friday after a strong national jobs report reinforced expectations of a larger Fed rate hike.

Yield curve inversion, where short-term yields are higher than long-term yields, is a phenomenon that has predicted recessions in the past.

The stock market appears to have ignored fears that tighter monetary policy and uncertainty surrounding the situation in Ukraine could lead the U.S. economy into recession, but bond investors appear to be taking a more pessimistic view.

Nevertheless, some analysts believe that the reliability of yield curve inversion as an indicator of recession has declined, especially as the Federal Reserve’s massive bond buying programs have kept yields on long-term securities in check

3. Oil price volatility

Both the price of Brent crude oil and WTI crude oil fell about 13% last week, marking their largest weekly declines in 2 years after US President Joe Biden announced the release of 1 million barrels per day of oil for 6 months beginning in May, which would be the largest release from the US Strategic Petroleum Reserve.

Russia’s special operation in Ukraine drove oil prices up about 30% in the first quarter, with rising energy prices a key driver of inflation expectations.


But energy market analysts were skeptical of the plan’s success.

“The sharp sell-off due to the announcement of the release of 1 million barrels per day from the Strategic Petroleum Reserve over the next 6 months will not have a lasting impact on oil prices, so if geopolitical risks continue to escalate, oil will recover most of its losses this week,” said Ed Moya, an analyst at online trading platform OANDA.

4- Economic data

Aside from Wednesday’s Fed minutes, the U.S. economic calendar is light this week, and the focus is likely to be on Tuesday’s ISM services business activity index.

Economists expect the index to rebound to 58.0 from a 12-month low of 56.5 in March. The aftermath of a wave of omicron diseases has caused the index to fall from a record high of 69.1 reached in December, and concerns about soaring inflation may now be limiting consumer demand.

The US will also release data on factory orders, initial jobless claims and the trade balance.

5. Central Banks

The ECB will release the minutes of its March meeting while its next meeting on April 14 is just over a week away. Last month, the ECB surprised the market by announcing it would accelerate its plans to withdraw stimulus measures.

Since then, data showed eurozone inflation hit a new record high of 7.5% in March, adding to pressure on the ECB to take action to curb inflation even as economic growth slows amid the lingering effects of the pandemic and the fallout from Russia’s military special operation in Ukraine.

The Reserve Bank of Australia is expected to leave the rate unchanged at its latest meeting on Tuesday.

The Bank of Canada will release its business outlook survey on Monday, and upbeat data could bolster expectations of a half a percent rate hike at its next meeting on April 13.