Inflation rose sharply in March, according to the latest data from India, the United Kingdom and the United States, but it does not reflect the full impact of the ongoing Russo-Ukraine war, suggesting risks are more skewed. Global price pressure.
Rising energy and food costs from the Ukraine conflict have added to price pressures in the countries.
Inflation in India was recorded at a 17-month high of 6.95 per cent, US inflation hit a four-decade high of 8.5 per cent and the UK inflation rate hit a three-decade high of 6.2 per cent in March. ,
While this data shocks inflation numbers across the country, these figures do not yet fully reflect the outcome of the Ukraine conflict, as Russia invaded Ukraine in late March.
Already disrupted global supply chains have been further distorted by the pandemic since Russia invaded Ukraine on March 22 and Western countries imposed sanctions on Moscow in retaliation.
Global crude oil prices have surged since Russia invaded Ukraine on February 24, with international benchmark Brent futures hitting a multi-decade high of nearly $140 a barrel last month.
While crude oil prices have eased from those highs, international oil prices have remained above $100 a barrel since Moscow invaded Ukraine, with benchmark futures contracts falling for the second week in a row.
High global crude oil prices have given rise to concerns about runaway inflation.
With no end in sight for peace talks between Russia and Ukraine and Western countries in an effort to isolate Moscow, the risk is that prices of commodities, energy and food will remain high or even rise, leading to inflation and inflation. will increase even more.
While inflation has been rising since last year, which most major central banks described as temporary, the Russo-Ukraine war has added to the price pressure.
This is likely to force most major central banks to adopt aggressive monetary tightening policy and has hurt economic growth.
The US Federal Reserve is expected to be the most aggressive based on the widely expected policy tightening path. This has propelled the dollar higher and hurt currencies on the other side of the exchange rate.
The strengthening of the dollar in countries with low forex reserves at a time of global rise in commodity prices and hurting import-dependent countries is likely to lead to a wider and larger economic crisis.
The economic crisis in Sri Lanka is a prime example of the outcome of the Ukraine war, with recent reports not far behind Nepal.
The risks of a global recession are also heightened by the Russo-Ukraine war, with stagflation a reality in most countries and no longer just a threat.