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Assessment: The shifting winds mean Powell has a tightrope to walk as he explains during two days of congressional testimony that his institution is committed to taming inflation while also being mindful of the geopolitical turmoil …

• Fed Chairman Jerome Powell addresses separate House and Senate panels this week as part of biannual hearings on monetary policy.
• Fears over the Russian invasion of Ukraine have coincided with markets quietly dialing down their expectations for Fed action.
• Powell will have to convince Congress the Fed is doing more to combat inflation at a time when the markets think it will be doing less.
• “The balancing act is going to be difficult,” said Mark Zandi, chief economist at Moody’s Analytics.

Federal Reserve Chairman Jerome Powell is tasked with telling Congress this week that the central bank will be doing more to control inflation at a time when markets expect it will be doing less.

With fears over the Russian invasion of Ukraine causing turmoil in the financial world, Wall Street has quietly dialed down its expectations for Fed action.

Where markets had been expecting the Fed to raise interest rates up to seven times in 2022, recent pricing now indicates just five moves. That would be the equivalent of bringing the Fed’s benchmark short-term borrowing rate up about 125 basis points, or to a range between 1.25%-1.5%.

Read More @ CNBC HERE

In a mirror image of yesterday’s overnight bounce, S&P futures and European markets have slumped to session lows as a risk off mood prevailed as US traders got to their desks having hit overnight highs of 4,399 just before the European open, as mood soured after the conflict in Ukraine intensified amid mounting penalties against Russia, and as participants look to a heavy data-docket ahead and Fed speak including Powell later in the week.

Any residual optimism was shattered after Ukrainian President Zelensky said that negotiations with the Russian side have not achieved required results while Russian Defense Minister Shoygu says Russia will continue operations in Ukraine until it achieves its goals. As a result, Nasdaq 100 contracts were down 0.9% as of 7 a.m. in New York after the cash index closed yesterday’s session with its second straight monthly decline, a trend not seen since October 2020. S&P 500 futures declined 0.7% or 30 points to 4,337  while Dow futures fell 0.7% or 230 points, reversing much of yesterday’s last hour ramp. Stocks trading in Moscow remained halted for a second day, and the VanEck Russia ETF plunged another 12%. Treasury yields fell for a second day to the lowest since January, and the dollar was steady. Brent crude jumped more than 5% as traders balanced the possible release of emergency stockpiles against fears of disruption to Russian energy exports.

Hopes of an early negotiated settlement over Ukraine faded after Russia vowed to continue its attack until its goals are met

Read More @ Zero Hedge HERE