Kaohoon Morning Brief – 27 January 2022

1) U.S. crude and gas inventories rise

Crude inventories rose by 2.4 million barrels in the week to January 21, 2022, to 416.2 million barrels, compared to an expectation of 0.7 million-barrel draw from a Reuters poll. Meanwhile, U.S. gasoline stocks rose by 1.3 million barrels to 247.9 million barrels, lower than what the analysts had expected of a 2.5 million-barrel rise.​ However, refinery utilization rates fell by 0.4 percentage points.


2) Fed indicates that rate hike is coming

The Federal Reserve on Wednesday made what investors believed was the clearest signal that the central bank could start raising policy rates as soon as March.

“With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” said the Fed.

The hike from easy monetary in 2020 will be the first rate hike in three years for the U.S.

“I think there’s quite a bit of room to raise interest rates without threatening the labor market,” said Fed’s Chairman Jerome Powell, adding that Fed will make final decisions on shrinking the balance sheet at upcoming meetings.


3) ECB warns European lenders of Russia sanction risk

The European Central Bank has warned that a sanction on Russia would raise significant risks for the international banks with large Russian exposure, such as US’ Citi, France’s Société Générale, Austria’s Raiffeisen and Italy’s UniCredit.

The warning came after the tension at the Ukrainian border has escalated over time with Russian troops standing by, while NATO is adding more arteries to the Eastern Europe.

Meanwhile, the U.S. has also warned that Russia would face massive consequences if it decides to invade Ukraine.


4) U.S. proposes diplomatic path for Russia

The U.S. Secretary of State Antony Blinken said Washington on Wednesday delivered a document to Moscow that proposes a serious diplomatic path forward should Russia decide not to invade Ukraine.

The document sets forth areas and ideas of how the U.S. and Russia can work together to advance collective security interests, according to Bliken.