The Fed signals it is in the inflation fighting game

<p>Kia ora,</p><p>Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news Russia's bombardment of Ukraine continues and they are making small gains at a very high cost. But 'peace talks' continue despite the brutal fighting, and markets still expect some sort of resolution in the near term.</p><p>Separately, the US Fed <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20220316a.htm" target="_blank"><strong>announced</strong></a> the expected +25 bps rate hike the markets were expecting, but they steepened the future policy rate path via their dot plot estimates. Today's was their first rate rise since 2018.</p><p>The initial market reaction has been reasonably orderly, but bond yields have risen sharpish, and the USD has also risen, although not against the NZD. Equity markets gave up some earlier-in-the-day gains.</p><p>Meanwhile, American <a href="https://www.census.gov/retail/marts/www/marts_current.pdf" target="_blank"><strong>retail sales</strong></a> came in +17.7% higher in February, than the same month a year ago. That is actually better than our weekly <a href="http://www.redbookresearch.com/8702.html" target="_blank"><strong>Redbook</strong></a> indications. Still the month-on-month rise wasn't quite up to market expectations, generating some disappointment.</p><p><a href="https://www.census.gov/mtis/www/data/pdf/mtis_current.pdf" target="_blank"><strong>Business inventories rose</strong></a> but not by as much as sales, so the inventory:sales ratio was stable overall, but had a healthy decline for the retail sector. Despite the supply-chain stress, these networks are not getting overstocked.</p><p>And American <a href="https://www.mba.org/2022-press-releases/march/mortgage-applications-decrease-in-latest-mba-weekly-survey-x295031" target="_blank"><strong>mortgage applications fell</strong></a> last week, whil