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So far, the year 2022 has brought nothing but problems. Together with wars, pandemics, inflation, supply-chain bottlenecks, and energy crisis, we are facing a variety of natural disasters. Following South Korea and China, the center of Japan was hit by a typhoon. In the coastal prefecture of Shizuoka, more than 72 thousand people were evacuated.
As for the U.S., a new study from Science Advances suggests that climate change has doubled the likelihood of catastrophic flooding in California over the next four decades. The greatest devastation will be in California’s Central Valley, which produces a quarter of the nation’s food. Of course, there is no reason to panic now but eventually, it could become a serious problem.
Europe, in the meantime, is suffering from the lack of rain. Following the Rhine River, Lake Garda in Italy faced a threat of drying out. The drying up of the Po River, the largest in Italy in terms of its catchment area and length, has already caused losses of billions of euros for the farmers who usually rely on it for irrigation of their fields and rice paddies.
Additionally, drought in Europe and low gas supplies from Russia have pushed the energy resource cost close to €230 per MWh. In terms of cubic meters, the price on August 15 was more than $2400 – the first time since the beginning of March. In this context, it is worth mentioning that the debt of British households to electricity suppliers reached a record level of 1.3 billion pounds.
As for the week ahead, markets will pay close attention to the release of the minutes of the last meeting of the U.S. Federal Open Market Committee. According to CME FedWatch, 55% of investors expect that the rate will be increased by 50 basis points in September. Thus, a little less than half of the respondents do not rule out a more aggressive step on the part of the regulator.
It is unlikely that the “minutes” will shed light on the regulator’s future actions, but the document could signal a shift in sentiment within the committee. On the macro side, Wednesday comes out the July retail sales report, likely to point to a slowdown in consumer demand. An increase in initial jobless claims, on the other hand, will signal a lower inflation risk in the U.S.
On Thursday, the Central Bank of Turkey’s short-term interest rate statement will be published. The rate is likely to be left at 14%. No wonder, the International rating agency Moody’s downgraded Turkey to a “junk” rating, amid growing pressure on the balance of payments and attempts to stabilize the lira exchange rate. Maybe it is time to end the “alternative monetary policy”?
