“The fallout from the war in Ukraine heightens the difficulty for the Fed in engineering a soft landing,” JohnCassidy writes.
, which shuttered factories, snarled international supply chains, and raised the price of everything from used cars to fried chicken. This concatenation of adverse events has prompted comparisons to the nineteen-seventies, when an oil-price shock combined with domestic price pressures led to stagflation and recession. The war in Ukraine represents a “global stagflationary shock,” Chris Keller, the head of economics research at Barclays,.
Well before the war started, Jerome Powell and his colleagues at the Fed had already decided that the threat of rising inflation justified removing some of the extraordinary monetary stimulus they have provided to the economy during the pandemic. At a scheduled policy meeting this week, they are set to raise the federal funds rate—for the first time since 2018—from zero to 0.25 per cent. Historically, a 0.
As the Ukraine conflict raises the price of grains and other commodities besides oil, other economists, including some Democratic ones, are less optimistic about the inflation outlook.
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