Unswayed Fed

The US central bank will stick to its guns and continue hiking interest rates despite softening inflation, according to two Federal Reserve officials. The figures, which came in below forecasters’ estimates, prompted investors to scale back rate bets, but Minneapolis Fed President Neel Kashkari hasn’t seen anything that changes the path. Kashkari wants the Fed’s benchmark interest rate at 3.9% by the end of this year and at 4.4% by the end of 2023. Charles Evans, his Chicago counterpart, expects the target range to rise to 3.25% to 3.5% by the end of 2022 and to 3.75% to 4% by the end of 2023.

Shallow Waters 

The Rhine River is set to become virtually impassable at a key waypoint in Germany as shallow water chokes off shipments of energy products and other industrial commodities along one of Europe’s most important waterways. The marker at Kaub, west of Frankfurt, is forecast to drop to the critical depth of 40 centimeters (just under 16 inches) early on Aug. 12, according to the German Federal Waterways and Shipping Administration. At that level, most barges that haul goods from diesel to coal are effectively unable to transit the river. While some barges will still be able to navigate the Rhine at Kaub, the dwindling water level illustrates how a climate crisis is compounding the region’s energy woes.

It’s Complicated

House Speaker Nancy Pelosi’s visit to Taiwan has made geopolitics with China “particularly complicated” as President Joe Biden weighs the future of tariffs on more than $300 billion in goods from the US rival, according to Gina Raimondo, his commerce chief. Biden is considering what to do with the Trump-era tariffs and is weighing his options, Raimondo said. Pelosi visited Taipei, Taiwan, last week in the face of threats and opposition from China, which regards Taiwan as part of its territory. In response, China’s military conducted exercises around Taiwan and test-fired missiles into the surrounding seas. 

Oil Flows Again 

Russia resumed oil flows through a pipeline to central Europe after Hungary’s sole refiner stepped in to resolve a tussle over the payment of a transit fee, easing fears of a supply crunch in the region. The transit fee payment agreement covers only flows to Slovakia and Hungary, not the Czech Republic, according to Slovnaft, part of Mol Group. The return of the southern Druzhba flows should prevent the worsening of what was already a tight market for fuels in Central Europe at the start of refinery maintenance season. 

Coming Up…

European equities are poised to gain alongside their global counterparts after the US inflation print curbed bets for aggressive Fed hikes. The UK Tory Party leadership holds hustings in Cheltenham. Expected data include Swedish unemployment and Irish inflation. Earnings season rolls on with companies including Deutsche Telekom, Siemens, and Brookfield Asset Management slated to report. Golf’s FedEx St. Jude Championship, the first event of the PGA’s end-of-season playoffs, starts in Memphis, Tennessee.

(Source: Bloomberg, August 11-2022)