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Economy

25 Feb 2022

Ukraine-Russia Crisis Disrupts World Central Banks’ Monetary Policy Stance

The Index Today

As central banks across the globe finalize tighter monetary policies to control pandemic-induced inflation, the turbulent situation between Ukraine and Russia may potentially alter the picture as it can have differing effects on world economies.

Policymakers are on the edge as the escalating conditions in Eastern Europe could lead to oil price hikes, and other grim economic repercussions in the form of stilted investments, trade and the overall financial situation of the bloc.

Central banks were poised for aggressive monetary tightening to counter inflation. However, stunted economic growth compounded by the geopolitical turmoil in Eastern Europe poses a major problem even as costs continue to climb.

As per analysts at Oxford Economies, “For the major advanced economy central banks, the intensification of the war now leaves them in a distinctly worse position.”

They also contended, “The high starting point for inflation...will make it hard for central banks to ignore the near-term upward forces on inflation. But at the same time, they will be aware that the latest developments increase the risks of very low inflation in late 2023 or 2024 due to a weaker growth outlook."

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