A Key Inflation Gauge Keeps Rising and War Could Make It Worse

Brent crude oil, the world benchmark, increased by 6% to reach more $100 a barrel on Thursday following Russia’s invasion of Ukraine and...


Brent crude oil, the world benchmark, increased by 6% to reach more $100 a barrel on Thursday following Russia’s invasion of Ukraine and could rise further as Russia reacts to US and European sanctions, before moderating somewhat. Russia is a major energy exporter to Europe.

“Potentially, Russia could retaliate by limiting oil exports,” Patrick De Haan, head of oil analysis at GasBuddy, said Thursday. Prices at the pump will likely reflect the fallout from the conflict almost immediately, he said.

Some economists have noted an uncomfortable gas shock precedent.

Rising energy prices in the 1970s helped exacerbate inflation, making rapid price increases a lasting feature of the economy, which only faded after a painful response from the Fed. The central bank pushed interest rates – and unemployment – into double digits to depress price increases during what is now known as the “Great Inflation”.

This episode came after years of rapid price increases that the Fed had been slow to mitigate. This time, the central bank is preparing to quickly withdraw its support.

The Fed is expected to launch a series of rate hikes in March, policy measures that should slow lending and spending, which could translate into weaker hiring, more subdued economic growth and more modest price gains.

“The Ukrainian situation probably doesn’t alter the fundamental conclusion that it’s time to change monetary policy,” said Julia Coronado, founder of MacroPolicy Perspectives. “They’re not just going to suspend all interest rate increases because there’s a war in Ukraine.”

Christopher Waller, a Fed governor, said in a speech late Thursday that the conflict could contribute to uncertainty, but for now the Fed should quickly withdraw support for the economy to try to control “alarming” inflation.

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Newsrust - US Top News: A Key Inflation Gauge Keeps Rising and War Could Make It Worse
A Key Inflation Gauge Keeps Rising and War Could Make It Worse
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