Ukraine crisis to affect inflation more than growth

As a result of the Ukraine crisis, we have revised up our inflation forecasts even further above the consensus. But we think that the impact of higher inflation on consumption will be cushioned by the high level of household saving and the release of pent-up demand for services. While the Ukraine situation might make the ECB more cautious at its March meeting, we still think that it will eventually agree to end its net asset purchases and raise interest rates this year.