Good day. The big central banking event of the week ahead is the Federal Reserve’s monetary policy meeting, with the Fed expected to raise its benchmark interest rate for the first time since 2018. The U.S. central bank faces an unusually complicated environment of a tight labor market, supply disruptions, spiraling inflation and now Russia’s invasion of Ukraine, which has clouded the outlook and worsened price and supply-chain pressures that many had hoped would soon ease. To see what Fed officials have been saying ahead of the meeting, take a look at our roundup of their recent comments below. Meanwhile, the Bank of England has raised interest rates twice since December to try to tame accelerating inflation and many economists expect another increase this week. By contrast, the Bank of Japan this week is expected to keep its ultra-easy monetary policy in place, given concerns over how the war in Ukraine will affect the global economy. In Russia, the central bank said Monday that it plans to set a new way to calculate the official exchange rate for the ruble against the dollar after the country's currency was thrown into into turmoil following Western sanctions in response to the invasion of Ukraine.

 Now on to today’s news and analysis.

Federal Reserve Chairman Jerome Powell stripped much of the mystery from the Federal Open Market Committee meeting scheduled for March 15-16 when he told lawmakers earlier this month that he is strongly inclined to support a quarter-percentage-point interest-rate increase at the gathering. Following Russia’s invasion of Ukraine, Mr. Powell also stressed that the Fed needs to be “alert and nimble” in a difficult environment. Here is a roundup of recent comments from central bankers.

As many as three Federal Reserve officials might urge the central bank to raise interest rates at its policy meeting this week by more than a widely expected 25-basis-point increase.

Dissents by Fed governors are rare. The last time one voted against colleagues at a Federal Open Market Committee meeting was in September 2005, when then governor Mark Olson favored easier policy than his colleagues. Triple dissents are also unusual: The last time that happened was at the FOMC’s September 2019 meeting, according to data from the St. Louis Fed. Read more. 

The Bank of Russia said on Monday that it would calculate the ruble's exchange rate against a wider range of quotes to reduce volatility in its currency. The Moscow Exchange said over the weekend that the country’s main stock market will stay closed this week, through March 18, though its currency market is open.

• How Europe Hopes to Wean Itself From Russian Natural Gas
• Russia-Ukraine War Threatens Wheat Supply, Jolts Prices
• Russian Prosecutors Warn Western Companies of Arrests
• Gazprombank: The Big Russian Lender That Dodged Western Sanctions
• Pressure Mounts for Western Companies Leaving Russia
• For the latest updates on Russia and Ukraine click here.

Chinese technology giant Tencent Holdings Ltd. is facing a potential record fine for violations of some central bank regulations by its WeChat Pay mobile network, as Beijing toughens its regulations for fintech platforms, according to people familiar with the matter.

Russia’s decision to pay some of its foreign creditors with rubles won’t necessarily constitute a credit event that would trigger $6 billion in derivatives contracts linked to the Kremlin’s creditworthiness, according to an industry body that presides over the credit default swap market. 

Deutsche Bank AG agreed to extend the term of an outside compliance monitor after Justice Department prosecutors found the bank violated a criminal settlement by not disclosing a misconduct complaint in its asset manager’s sustainable-investing business, the bank said.

Time N/A: ECB’s Lagarde and Panetta at Eurogroup meeting
7:30 p.m.: Reserve Bank of Australia releases meeting minutes

Time N/A: ECB’s de Guindos at ECOFIN meeting
Time N/A: U.S. Federal Reserve begins two-day policy meeting
7:30 a.m.: U.S. producer price index for February
10:15 a.m.: ECB’s Lagarde at 31st WELT Economic Summit

Expectations for inflation a year out jumped in March, according to the University of Michigan’s report on its consumer sentiment index, released Friday. Survey respondents see inflation at 5.4% in a year, compared with 4.9% forecast in February, while expectations for inflation in five years held steady at 3%. Survey director Richard Curtin added that “current expectations are consistent with heightened pressures on wages to meet the continued growth in demand.” He said that “like the game of musical chairs, everyone continues racing around the circle of rising prices and higher wages. Although everyone knows the game will end, everyone still wants to obtain the highest income possible before they exit.”

—Michael S. Derby

• U.S. consumer sentiment deteriorated at the beginning of March as inflation dampened incomes, compounded by rising fuel prices following Russia’s invasion of Ukraine, according to survey data released by the University of Michigan. The preliminary estimate of its consumer sentiment index for this month fell to 59.7 from February’s final reading of 62.8. (Dow Jones Newswires)
• Canada’s labor-market rebounded sharply in February after a Covid-19-related drop, as the unemployment rate for the first time dropped below prepandemic levels. Statistics Canada said employment rose by a net 336,600 after a decline of roughly 200,000 in January. Market expectations were for a gain of 130,000, according to economists at TD Securities. (DJN)
• Canada’s industrial capacity utilization rate rose during the October-to-December period, led by gains in the manufacturing and construction sectors. Overall, industries operated at 82.9% of their production capacity in the fourth quarter, or a 1.2% increase from the third quarter, Statistics Canada said. (DJN)
• Inflation in Brazil accelerated in February as education costs and the price of food and drink climbed. Consumer prices rose by 1.01% from January, the fastest pace for the month since 2015, and by 10.54% from a year earlier, the Brazilian Institute of Geography and Statistics said. (DJN)
• Mexico’s industrial production rose 1% in January from December in seasonally adjusted terms, marking a fourth consecutive monthly increase, according to official data. (DJN)
• Argentina’s lower-house approved an agreement between the government and the International Monetary Fund to refinance about $45 billion in debt, with 202 votes in favor of the deal, 37 against and 13 absentees. The agreement requires approval from the senate. (DJN)
• Fitch Ratings revised its outlook on Costa Rica to stable from negative and affirmed the country’s Long-Term Foreign Currency and Local Currency Issuer Default Ratings at ‘B’. Fitch said its revised outlook reflects better-than-expected improvements in the country’s fiscal position and economic activity following pandemic-related shocks. (DJN)
• Up to 13 million more people world-wide could face food deprivation, while the international prices of food and animal feed could rise by up to 22% this year and in 2023 as a result of Russia’s invasion of Ukraine, according to the U.N.’s food agency. (DJN)
• The Monetary Authority of Singapore may tighten policy in April, Citi Research says, citing the central bank's price-stability mandate and the prospect for higher-for-longer inflation. Citi expects Singapore's core consumer prices to rise 3.3% in 2022 versus 2.8% projected previously, due to higher commodity prices and elevated wage pressures. (DJN)
• Kenya's current-account deficit widened to 5.6% of gross domestic product in the 12 months to January from 4.3% of GDP a year earlier, the country's central bank said. (DJN)
• International Monetary Fund Managing Director Kristalina Georgieva said sanctions and import bans have drastically crimped Russia's financial outlook and could cause it to default on its debt. "In terms of servicing debt obligations, I can say that: No longer do we think of Russian default as [an] improbable event," she told CBS's Face the Nation. (DJN)
• Russia's finance minister said the country will fulfill its debt obligations but will issue payment in rubles until Western nations unfreeze its foreign-currency reserves. (DJN)

This newsletter is compiled by James Christie in San Francisco.

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