(Reuters). -Russia’s invading of Ukraine will have wide-ranging effects on the economy and financial market. Inflation and economic growth may be impacted by oil’s rise above $100/barrel. OPEC+ will not be producing any additional oil on Wednesday, however.

Although the Bank of Canada might not hesitate to announce an increase in interest rates, the change in the growth-inflation equation presents a problem for policymakers.

However, events could help Australia’s BoC counterpart to justify their resolutely dovish stance. Meanwhile, U.S. unemployment and European inflation readings can be fodder for Fed and ECB before they meet in March.

This is your market week in Tokyo from Kevin Buckland, Ira Iosebashvili, Ahmad Ghaddar and Sujata Rahvili.

1/HIGHER OIL, BUT PERHAPS OTHER THAN OPEC

Russia’s Ukraine invasion has raised oil prices to $105/barrel. However, the Biden administration states that it is working alongside allies for a joint release of extra crude oil from its global strategic reserves.

The OPEC+ producer group will also meet Wednesday and review its strategy to increase output by 400,000 barrels per hour. OPEC+’s production has always been lower than target because some of its members have difficulty coping with their capacity.

Before the Russian attack on Nigeria, Nigeria’s oil Minister stated that U.S.-Iran talks over Iran’s nuclear program could open the door for Iranian oil exports rising. This would mean additional OPEC+ supply may not be necessary. nL1N2UY0J1]

Some Russian oil buyers claim that it is difficult to get Western bank guarantees or to find vessels to carry oil from the largest producer in the world.

2. Higher Pay

March will have a significant impact on monetary policy globally. Friday’s U.S. payrolls numbers number will be its last report before the Federal Reserve meets March 15-16.

Fed Chairman Jerome Powell said that inflation is at an all-time high of 40 years. This meeting could enact its first interest rate rise since the end-2018. However, the Fed’s outlook on the future could be influenced by the employment data.

Reuters survey predicts that 381,000 new jobs will be created in February. Average earnings also increased by 5.8% annually. Numbers well above that might revive expectations of a half-percentage-point rate rise, which have been pared back as the Ukraine crisis has escalated, triggering heavy stock market falls.

Markets currently price in 150 points or more of an increase in interest rates by February.  

3.HIGHHER INFLATION

According to one economist, January’s inflation print of 5.1% in the euro zone was a blow for the European Central Bank. The bank appeared to give up and admit that an increase in interest rates for 2022 was possible.

Oil and food prices have been soaring as a result of the conflict in Ukraine. Russia and Ukraine are both major producers of grain. It seems unlikely that the 5.2% inflation print for February, due Wednesday, will reach its peak. Flash inflation in Germany, which is due to rise at 5.1%, will also be expected.

Elevated oil prices could cause European inflation to reach 5.7% in this year. This is a full percentage point higher than the non-conflict scenario. Deutsche Bank (DE:) estimates. However, the ECB is likely to suffer a significant hit on GDP.

4./HIGHER INTEREST RATE

Whether Ukraine is in the news or not, central banks cannot delay tightening their policy. It seems likely that the Bank of Canada will raise its interest rates by 25bps on Wednesday. It marks Canada’s first rate hike in more than three years.

    With inflation at 30-year highs, markets price in just under six rate hikes this year.

    Economists do not rule out a 50 bps move in March. The BoC has a 2% inflation target, and the BoC has seen an increase of 1% for 10 months straight. Timothy Lane, the Deputy Governor of Canada, recently warned that the BoC would not be “nimble” or “forceful” when it comes to tackling inflation.

5/BUT NOT YET HIGHER DOWN UNDER

Australia’s Reserve Bank of Australia may have more reasons to remain afloat in the wake of the Ukraine crisis.

While Governor Philip Lowe is arguing with markets over rate hikes this year, it was expected that the RBA would not change its record low 0.1% rate on Tuesday.

    Traders reckon an inflation shock will force a rate hike by the third quarter. Lowe admitted that a rate hike this year would be possible, but he still urges patience.

    And he can point to New Zealand’s recent decision to forgo a half-point rate increase in favour of a smaller 25 bps move.