Weekly Commentary

Last week, U.S. stock indices showed positive dynamics: the S&P 500 index rose by 1.5%, and the Nasdaq gained 2.9%. The European EUR STOXX 50 index added 3.2%. Brent crude oil prices increased by $0.1, closing at $74.7.

There is no need for a rushed monetary policy easing, emphasized Jerome Powell during his congressional testimony, highlighting the economy’s resilience, labor market balance, and inflation exceeding the target level. The Fed may consider easing policy if the labor market weakens or inflation declines faster than expected. However, with steady economic growth and persistent inflationary pressures, the regulator is prepared to maintain a restrictive policy for longer. Powell noted that the Fed focuses on the more accurate inflation gauge, the PCE index, which indicates that the inflation target has not yet been reached. Commenting on Trump's tariffs, Powell stated that the Fed would respond carefully and thoughtfully to their impact. Regarding a possible dismissal of a Fed Board member by the president, he firmly responded that such an action is "clearly prohibited by law." Powell also mentioned that the quantitative easing (QE) program would only be used if rates hit zero and that the Fed’s balance sheet reduction would continue as long as excess reserves remain. He stressed that the current U.S. debt trajectory is unsustainable and should be addressed now before the situation worsens. Overall, Powell’s rhetoric was moderately hawkish, avoiding direct confrontation with the White House. The market reaction was muted, but hopes for an imminent rate cut continued to fade.

U.S. consumer inflation (CPI) for January was higher than expected: the CPI rose by 0.5% MoM (forecast: +0.3%) and 3.0% YoY (forecast: +2.9%), while the core CPI increased by 3.3% YoY (forecast: 3.1%). The monthly price increase was the highest since April 2023. Inflation in services, excluding energy, rose by 0.5% MoM and 4.3% YoY. For goods excluding energy and food, prices increased by 0.3% MoM but remained negative YoY (-0.1%). Trump's tariff measures are adding further pressure on inflation, complicating the Fed’s position and reducing the likelihood of an early monetary policy easing.

Key events for this week:

• 16.02.2025: Japan GDP data
• 18.02.2025: Reserve Bank of Australia meeting
• 19.02.2025: Release of the Fed meeting minutes
• 19.02.2025: China interest rate decision
• 21.02.2025: PMI data for the U.S., EU, and UK

Companies reporting this week:

• 17.02.2025: BHP;
• 18.02.2025: Medtronic, Baidu, Occidental Petroleum, Arista Networks, Toll Brothers, Devon Energy, Entergy, Fluor, Watsco, Halozyme, Celanese, Conagara Brands;
• 19.02.2025: HSBC, Analog Devices, Etsy, Toast, Garmin, Wix, Fiverr, Vale;
• 20.02.2025: Walmart, Alibaba, Bilibili, NetEase, Booking, Copart, Rivian, Mercadolibre, Block, Unity, Newmont, Wayfair, Cameco, Baxter, Nice, Cheniere, Five9;
• 21.02.2025: Vipshop, Trip.com.