A Russian invasion of Ukraine or severe ratcheting up of sanctions would add as much as 2%-pts to inflation in DMs, particularly in Europe. Given the inflationary backdrop and hawkish signals from central banks, monetary policy could be tightened more aggressively as a result, although fiscal policy could be loosened to cushion the blow to real incomes. Over the longer term, whether Russia ends up invading or not, this geopolitical flare-up is likely to speed up the process of Russia’s decoupling from the West.
In view of the wider interest, we are also making this Global Economics Update available to clients of our Commodities Overview Service.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services