All eyes on FOMC meeting as stagflation risks loom

BEFORE the Russian invasion of Ukraine, there were murmurings in some circles that stagflation in the US could be a looming problem. The first hint of this came after last August's shocking jobs miss, when only 235,000 jobs were created versus projections that the figure would be 720,000.

This gave an early indication that the US economy may not necessarily have been in the "Goldilocks" position that markets had been betting on, where growth was not too hot nor too cold, like the porridge in the children's story.

Since August, the US Federal Reserve has retired the word "transitory" when describing inflation, and openly acknowledged that rising prices is a problem that will have to be tackled. That was in November, 2 months before the Russia-Ukraine conflict. Soon after the invasion, the Federal Reserve Bank of Atlanta's GDPNow model estimate for real gross domestic product growth (seasonally adjusted annual rate) in the first quarter of 2022, which has been progressively lowered over the past few weeks, is just 0.5 per cent as of Mar 8.