The inflationary consequences of Russia’s war will spread

Inflation, already high, will go higher still. What will central banks do?


LAST SUMMER, amid mounting alarm about inflation in America, economic advisers in the White House penned a blog post in which they examined historical parallels. Although the press was full of comparisons with , they wrote that a nearer relative was the dislocation after the second world war, when supply shortages interacted with pent-up demand. It was a well-reasoned argument. But the surge in commodity prices over the past month, in the wake of Russia’s invasion of Ukraine, gives rise to an unsettling question: is the global economy now seeing a 1970s-style price shock on top of a late-1940s-style supply crunch?To be sure, no serious economist expects inflation in the rich world to reach the giddy double-digit heights of those episodes. On March 16th the Federal Reserve raised interest rates for the first time since 2018, kicking off a tightening cycle that it expects to continue well into next year. Moreover, the retreat in oil markets in recent days could offer relief.

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