Reining inflation around the globe amidst Russia-Ukraine tension
- 07-Mar-2022 6:44 PM
- Journalist: Jacob Kutchner
Ever since the war between Russia and Ukraine broke out in the early hours of Thursday, 24th February, the markets around the world have been volatile, and the sentiments can be delineated. However, history is proof that the markets do recuperate after wars. Russia and Ukraine comprise less than 2% of global trade, yet they have a significant share in many commodities, i.e., 17% of natural gas, 13% of wheat, 12% of Crude oil, 37% of Palladium, and 9% of nickel. After rattling the markets across the globe, Russia's invasion of Ukraine has barraged a number of sanctions imposed on the country, along with the supply chain interlinkages that are bound to impact global trade and finance.
According to the International Monetary Fund (IMF), the prices of energy and commodity have skyrocketed due to the Russia-Ukraine military conflict, augmenting inflationary pressures from supply chain disruptions and recovery from the Covid. The unabated price shocks will have a worldwide impact, especially on poor households where fuel and food are a higher proportion of expenditure.
"Should the conflict escalate, the economic damage would be even more devastating. The sanctions on Russia will also have a substantial impact on the global economy and financial markets, with significant spillovers to other countries," IMF said. Monetary authorities are advised to carefully monitor the transition of rising international prices to domestic inflation. As Russia is a major exporter of Crude Oil, wheat, and palladium, prices for these products have spiked as a result, whose effect can be seen in the international as well as domestic markets.
The US inflation reaches a 40-year high and hits its fastest pace, i.e., 7.5% since 1982 in February, amid the Russia-Ukraine conflict. The Supply chain disruptions along with rising demand continue to exacerbate the prices of fuel, rent, food, and other necessary items. The Federal Reserve is expected to raise the interest rates to subdue the soaring prices. Inflation in Germany is currently around 5.1% and is likely to remain high until the second quarter of 2022. As the US is providing aid to Ukraine in terms of defence and supplies, the country is printing more US dollars to cope with the rising inflation.