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The central bank will raise interest rates steady while starting a balance sheet reduction

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The central bank will raise interest rates steady while starting a balance sheet reduction.

According to the latest development between Russia and Ukraine, Russia conducted a military operation and hit major Ukrainian oil facilities. On top of that, various reports say that the Russian military force has committed war crimes in Ukraine.

The European Union is now aiming to start new sanctions on Russia, and this time, the targeted sector is coal imports. Apparently, Russia is one of the largest countries in terms of coal exports. By banning these imports, Russia might reconsider its military invasion.

Currently, European countries are the top buyers of Russia’s thermal coal. At an annual rate, Europe’s coal imports amount to an estimated 57 million tons of thermal coal yearly. China was the second-largest buyer, with 31 million tons purchased each year. South Korea by 20 million tons and Japan by 18 million tons yearly. 

Global traders’ sentiment is falling because of the recent sanctions, and there are talks of a few more sanctions being conducted by the U.S. As for the U.S., the country isn’t one of the top buyers of thermal coal, but it remains one of the top buyers of Russian oil.

Amid new sanctions, Wall Street investors are showing their fears about a near-global recession crisis. Today, the Australian central bank lifted its interest rates for the first time since 2010. The war’s consequences will be felt by everyone this year, and it will be a global disaster.

According to the market, this morning, oil and natural gas prices will rise this week.

The West Texas Intermediate declined to $103 per barrel.

Natural gas increases by an average of $6 per gallon.

The price of Brent crude has risen to $107 per barrel.

Heating oil prices declined by 1.9% to settle at $3.44.

Despite the concern about energy prices, the stock market had an outstanding close yesterday. Following the announcement that Tesla CEO Elon Musk is now the largest shareholder in Twitter, the tech-heavy Nasdaq index jumped more than 20%. Musk has previously said that he dislikes Twitter and is planning to launch his own social media platform. After the acquisition, Twitter shares rose by 25%, leading to yesterday’s gains.

Major economists believe that the U.S. economy is steadily growing and recovering, but at the same time, it is still fragile against the war’s consequences. Today, the Federal Reserve governor, Lael Brainard, announced six interest hikes starting next month.

The Federal Reserve policymakers are still on track to raise interest rates six more times this year, with more hikes likely in 2023 and 2024. To reduce the inflation pressure, the central banks may increase their interest rates by at least 50% and start reducing their balance sheets.

However, considering the fast growth and recovery of the economic state, it’s expected that the process of reducing the balance sheet will be faster and way smoother than expected. Even with these reinsurances, traders are concerned about the long-term effects, particularly on the housing market, the manufacturing industry, and the S&P. 

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