(Reuters) – Central banks struggle with inflation, and falling stocks feel the heat. Investors are left to wonder where the “Fed Put” went.

The minutes of the most influential policymakers around the globe may provide some insight, as New Zealand’s and South Korea’s central banks consider how large their rate increases should be in order to catch up to the Fed. Washington has the keys to Russian sovereign default, as the crucial deadline nears.

This is your week in review from Ira Iosebashvili, Kevin Buckland, Tokyo, and Dhara Ranasinghe.

1 FED THINKING

Is the Federal Reserve capable of containing the most severe U.S. inflation since decades, without the risk of dragging the country into recession? Leakage of minutes from the bank’s May 25 meeting will provide clues.

Chairman Jerome Powell believes the Fed will achieve a soft landing — words which are not enough to comfort equity markets, as Wall Street banks continue to issue warnings about upcoming recessions. The Fed has raised rates 75 basis points in March and is likely to increase them by 50 basis points in July.

Powell has pledged that he will raise interest rates as high to contain inflation. Minutes will demonstrate how determined policy makers anticipate inflation to be, and whether growth has the resilience to withstand tighter monetary policy.

(Graphic: https://fingfx.thomsonreuters.com/gfx/mkt/egpbkwygzvq/Pasted%20image%201652922084575.png)

2. A BEAR HUG

Wall Street is melting. Major stock markets indexes have fallen by around 19%. The Nasdaq, which is the most popular in the market, has seen a 25% drop since its peak of November 2021. There is no relief in sight. Barclays Goldman and (LON-:) predict more pain in equities due to surging inflation that will affect corporate margins.

There is widespread selloff. This selloff is widespread since the peak of the bond bull markets in March 2020. Since a 30-year U.S Treasury bond with a consistent duration lost half its value by March 2020, safe-haven assets like gold are down 6% each quarter. Even stock traders who are experienced in picking stocks will be reluctant to make big investments due to the rising volatility.

Both retail and institutional investors are bearish. U.S. fund managers run their largest cash reserves since September 2011 while the retail sentiment index for investment is near its March 2009 low.

(Graphic: https://fingfx.thomsonreuters.com/gfx/mkt/znvneozkkpl/AAII.JPG)

3 PIVOT POINT

The forward-looking Purchasing managers’ index (PMI), data for the United States and other countries, including Australia, Britain, Japan, Japan, Canada, Japan, and the euro zone, is something worth keeping an eye on. It is more difficult than ever with central banks trapped between surging inflation, its effect on consumers and a dimming outlook due to China’s COVID Lockdowns and War in Ukraine.

China’s rapid recovery from the pandemic of 2020 was due to record exports, factory production and a strong economy. But it could take longer to recover.

Inflation fighters may be so entrenched that policymakers will have no choice but to concentrate on the risk of recession. The PMIs may be showing how close they are to that point, although they have been performing well in recent months.

(Graphic: https://fingfx.thomsonreuters.com/gfx/mkt/xmpjoxlkovr/PMIS1905.PNG)

4/ EARNLY MOVERS TATCHING UP

These were the early movers, but it is now up to central banks in New Zealand or Korea to keep up with a Fed that’s hot on their heels.

Although the Reserve Bank of New Zealand will likely raise rates by half point on Wednesday in an effort to contain inflation, there are increasing risks to the economy. Recent homebuyers feel the pinch of rising mortgage rates.

    Korea’s new central bank governor roiled markets by flagging a half point increase before his maiden meeting on Thursday. The fragile won could be squeezed if the curve is not followed, sending energy and import prices spiralling.

Bank Indonesia is expected to be one of the last holdouts when it meets on Tuesday.

(Graphic: https://fingfx.thomsonreuters.com/gfx/mkt/znpneozzlvl/Pasted%20image%201652964894923.png)

5/ RUSSIA’S FACES DEFAULT. AGAIN

Russian sovereign default has become a real possibility. A U.S. license to allow Moscow to make payments is due on May 25, with $100 million interest payments.

Russia’s 40 billion-dollar sovereign bond portfolio is just one flashpoint after the invasion of Ukraine by Russia on February 24, which prompted harsh sanctions from Moscow.

It is also important to know if gas will continue to flow to Europe. As firms try to verify how legal they can buy gas, they must pay in rubles. Payments are due May 20. Although the EU advised businesses against opening accounts in roubles, it did not say that this would violate its sanctions against Moscow. Russia provides around 40% of EU’s natural gas.

(Graphic: https://fingfx.thomsonreuters.com/gfx/mkt/gdpzyewzyvw/Russia%20gas%20exports.PNG)