Written by Shane Balkham.
The Federal Reserve set out its stall for 2022 in its December meeting last year, with an acceleration in the ending of their asset purchase programme, which would clear the way for potentially three rate hikes this year. This was useful forward guidance from the world’s most important central bank.
The Federal Open Market Committee is meeting this week to discuss and plan the orderly removal of liquidity, mainly to combat the continuing rise in inflation. The rhetoric of just one month ago now seems stale, as the market is now looking for four rate hikes in 2022. The backdrop of rising inflation has seen investors calling for more action from the Central Bank. Jamie Dimon, CEO of J.P. Morgan, is looking for a more aggressive Fed. He was quoted as saying “there is room for six or seven rate hikes this year”.
Whatever the outcome of the meeting this week, the Fed needs to move quickly as markets look to move ahead of where the Central Bank was aiming. It is a call to arms for the policymaker to take significant and appropriate actions.
Another battle, that is hopefully not going to be fought, is also becoming increasingly tense. This was brought into the media spotlight last week with President Biden claiming an incursion by Russia was likely. A new approach to avoiding a potential war has been to make the situation public. This war of words has arguably stolen Vladimir Putin’s ability to surprise but has equally shown the West to be disjointed in knowing how to handle Russia.
However, this could be perceived as having backed Putin into a corner, with Moscow reaffirming its original warning of “unpredictable and grave consequences” if the US does not concede to rolling back the expansion of NATO. This is precariously balanced with deterrents and decisions at a decisive juncture.
Microsoft announced its $70 billion deal to acquire video game developer Activision Blizzard. Known for online gaming series Call of Duty, Candy Crush, and World of Warcraft, this is a land grab for expertise in the early stage of the Metaverse. The deal reverberated across the gaming industry with Sony taking the brunt of the negative share price reactions, as Microsoft looks set to turn itself into one of the biggest creators of online gaming.
This is the biggest deal in Microsoft’s history and will undoubtedly attract scrutiny from the US antitrust regulators, who have been readying themselves to tackle the dominance of ‘Big Tech’.
