Economics: The global cost of Russia’s invasion
Another negative supply shock
Russia’s invasion of Ukraine is yet another negative supply shock for the global economy, which will push inflation up while weighing on growth. The net impact is uncertain, and the situation is fluid, but it seems likely Europe will be hardest hit.
The economic consequences of sanctions
Russian sanctions will curtail bilateral trade flows and could reverberate through global financial system. Europe looks most exposed, but the indirect impact of higher commodity prices and increased uncertainty may hit global demand more broadly.
Limited impact on central banks
The invasion is likely to reinforce the ECB’s cautious stance, but it’s unlikely to prevent further rate hikes from the BOE or Fed. Still, we continue to believe both will ultimately have to hike rates less aggressively than is currently priced in by markets.