Western powers have responded to Russia’s intervention in Eastern Ukraine by imposing sanctions, but stocks should open higher as investors reacted positively to the measured nature of the reaction. Inflation in the eurozone remains elevated, meaning the European Central Bank will soon join the Bank of England in making difficult monetary policy decisions. Here’s what you need to know about the financial markets on Wednesday, February 23.

1. limited western sanctions

The West has responded to the introduction of Russian troops into eastern Ukraine with sanctions against Russian banks as well as members of the Russian elite with close ties to the Kremlin.

However, they fall far short of the harsh economic measures that the U.S. and its allies have promised if Russia enters Ukraine.

With the new sanctions, the West is trying to maintain influence over Moscow in an attempt to prevent an invasion of all of Ukraine, including the capital Kiev. However, it could also be seen as a sign of weakness amid concerns over whether the global economy can cope with rising energy prices as well as rising interest rates, creating the potential for stagflation.

2. Monetary policy problems in the UK

The extent of the difficulties currently facing the Bank of England was revealed by the central bank’s deputy governor Ben Broadbent in an annual report to parliament on Wednesday.

“This is the most challenging period for monetary policy since inflation targeting began in 1992,” he said.

The Bank of England raised interest rates to 0.5 percent this month from 0.25 percent, the second increase in the past two meetings, and investors expect another rate hike at the bank’s next scheduled meeting in mid-March.

Broadbent said there is no guarantee that the inflationary impact of higher import prices will fade quickly.

That view was echoed by Deputy Governor Dave Ramsden, speaking Tuesday at the National Farmers Union’s annual conference.

“Some further moderate tightening of monetary policy is probably appropriate in the coming months,” Ramsden said. – “But there could be further shocks – we did not anticipate the recent rise in energy prices and, as we see today, the crisis in Ukraine is gathering momentum.

3. stocks will open higher; S&P will exit the correction zone

U.S. stock markets are set to open higher later in the day, recovering from recent heavy losses, as investors are more optimistic about developments in Eastern Europe.

By 6:10 a.m. ET (11:10 a.m. GMT), Dow Jones futures were up 210 points, or 0.6%, while S&P 500 futures were up 0.7% and Nasdaq 100 futures were up 1%.

There are no major economic data releases on Wednesday. The focus is on shares of cybersecurity company Palo Alto Networks Inc, which beat analysts’ expectations with its second-quarter earnings report, and Virgin Galactic Holdings Inc. The space company reported lower-than-expected results in the fourth quarter.

4- Eurozone inflation draws attention to March ECB meeting

Eurozone inflation remained high in January, with the annual rate confirmed at 5.1%, up 0.3% on the month. This increases pressure on the European Central Bank to rein in monetary policy, which still includes a bond buying program.

The ECB is expected to signal an end to bond purchases in the third quarter at its next meeting in March, opening the door for a rate hike before the end of the year.

However, ECB policymaker Robert Holtzmann disputed this consistency, saying in a press interview that the central bank could start raising interest rates before it ends its asset purchase scheme.

5. Oil retreats from seven-year highs

Crude oil prices gave back some of the gains of the previous session on Wednesday, falling from a seven-year high, as the West failed to target the Russian energy market.

“The sanctions announced so far should not have much impact on Russian oil exports,” ING analysts said in a note. – Local banks, which are heavily involved in the commodities industry, have remained untouched.”

At the same time, Western powers and Iran appear to be close to reviving a nuclear agreement that, in exchange for Tehran curbing its nuclear ambitions, would lead to a return of crude oil exports from the Persian Gulf country to the world market.

Investors are now awaiting data on U.S. crude oil inventories from the American Petroleum Institute, due to be released later on Wednesday after the holiday weekend.