Economic Fallout From Russia’s Invasion Will Be ‘Modest’—But Inflation Will Surge Higher, This Expert Predicts

While Russia’s invasion of Ukraine is taking a “massive” human toll, the global economic fallout is likely to remain “modest,” according to a recent note from Moody’s Analytics chief economist Mark Zandi, though he predicts the U.S. economy will still feel the effects of higher inflation due to surging energy prices, and said the stock market remains at risk of a further selloff.

Russia’s invasion of Ukraine—and the subsequent surge in oil prices—is “especially bad timing” for the U.S. economy as it deals with “already painfully high” inflation, Zandi said in a new note on Monday.

Stock prices are down around 10% from all-time highs at the start of the year (a loss of approximately $5 trillion in market capitalization) as investors prepare for higher interest rates, but the Russia-Ukraine conflict could heighten the risk of a selloff, numerous experts have recently warned.

If inflation expectations start to rise as a result of higher oil and gas prices, the Federal Reserve “will have little choice” but to raise interest rates more aggressively than previously forecast (with investors already anticipating as many as seven 0.25% rate hikes in 2022), Zandi argues.

The prospect of more aggressive interest rate hikes also “increase[s] the odds that the economy will stumble,” he says, predicting that if oil prices stay at around $100 per barrel for a “sustained” period of time, that would add as much as 0.5% to year-over-year inflation, which is already at a 40-year high of 7.5%.

That would still only have a “modest impact” on the U.S. economy, according to Zandi, who argues that the most likely scenario is that Russia’s military goes no further than Ukraine and the disruptions to energy markets will be “limited and temporary.”

“The impact on the U.S. economy isn’t likely to be significant,” though higher oil prices will certainly put a dent in consumer confidence, agrees Lindsey Bell, Ally’s chief markets and money strategist, in a recent note.

The fallout from Russia’s invasion “means the Fed is going to have to be even more careful and it’s going to have to tolerate higher inflation,” Allianz chief economic advisor Mohamed El-Erian told CNBC last week. “Historically, when inflation gets this high and the Federal Reserve has lost its inflation credibility and has lost the policy narrative, they are forced to slam on the brakes,” he said.

While the global economic fallout from the invasion will likely remain “modest,” according to Zandi, “it will be a different story for the Russian economy, which is set to take a massive hit” as Western governments unveil harsh sanctions. Although Europe’s economy is more likely to take a hit (as it relies heavily on Russia for natural gas), “its economic recovery will continue,” Zandi predicts, though he adds

Russia’s economy will “suffer a debilitating recession” from sanctions. Russia has some $650 billion in reserves, he points out, but the sanctions will cut them by “significantly more than half.” That prospect makes it more difficult for the Russian central bank, which recently more than doubled interest rates to 20%, as it scrambles to support the ruble, which fell up to 30% against the U.S. dollar on Monday.

“The totality of the sanctions imposed will be a big hit to the Russian economy, and we expect Russia to suffer a serious recession this year, even more severe than that experienced during the pandemic,” Zandi says.

If oil prices stay at $100 per barrel for a while that will end up costing U.S. consumers approximately $80 billion more at the gas pump, Zandi estimates. Numerous experts have recently predicted that oil can surge even higher, up to $130 per barrel if the conflict jeopardizes global supply.

Analysts at JPMorgan, meanwhile, predict that oil will fall back to $90 per barrel by later this year because even if Russian energy exports decline, a potential nuclear deal between the United States and Iran could help offset lost supply in an already tight market.

Other scenarios for how Russia’s invasion of Ukraine might play out. If Russia halts its exports of oil and natural gas altogether, “it is plausible under this scenario that oil prices will spike closer to $150 per barrel,” Zandi predicts. The “darker” scenario is that Putin extends his invasion beyond Ukraine, which would cause “severe” damage to the global economy and make a global recession “unavoidable,” he adds, though it would also “push the reeling Russian economy even deeper into the abyss.”

Follow me on Twitter or LinkedIn. Send me a secure tip.

I am a senior reporter at Forbes covering markets and business news. Previously, I worked on the wealth team at Forbes covering billionaires and their wealth.

Source: Economic Fallout From Russia’s Invasion Will Be ‘Modest’—But Inflation Will Surge Higher, This Expert Predicts

.

More contents:

Dow Falls 400 Points As Investors Weigh Latest Sanctions On Russia (Forbes)

Russia’s Invasion Of Ukraine Has Sent Energy Prices Soaring—Here’s How High Oil Could Rise (Forbes)

Russian Invasion Triggers ‘Scary’ Stock Market Correction—Here’s How Major Geopolitical Shocks Have Rattled Markets Before (Forbes)

The Federal Reserve’s ‘War On Inflation’ Is More Important For Stocks Than The Russia-Ukraine Conflict (Forbes)

Big number: $80 billion

If oil prices stay at $100 a barrel for a while, it will end up costing U.S. consumers about $80 billion more at the gas pump, Zandi estimates. Many experts have recently predicted that oil could rise even higher, up to $130 a barrel if the conflict jeopardizes global supply. JPMorgan analysts, meanwhile, predict that oil will fall back to $90 a barrel by the end of the year, as even if Russian energy exports decline, a possible nuclear deal between the United States and the Iran could help offset the loss of supply in an already tight market.

To monitor :

Other scenarios of how Russia’s invasion of Ukraine could play out. If Russia completely halts its oil and natural gas exports, “it is plausible in this scenario that oil prices will climb closer to $150 a barrel,” Zandi predicts. The ‘darkest’ scenario is for Putin to expand his invasion beyond Ukraine, which would cause ‘severe’ damage to the global economy and make a global recession ‘inevitable’, he adds, although that it would also “push the faltering Russian economy even deeper into the abyss.”

.

Marketing Materials:

https://quintexcapital.com/?ref=arminham     Quintex Capital

https://www.genesis-mining.com/a/2535466   Genesis Mining

http://www.bevtraders.com/?ref=arminham   BevTraders

https://jvz8.com/c/202927/369164  prime stocks

https://jvz3.com/c/202927/361015  content gorilla

https://jvz8.com/c/202927/366443  stock rush

https://jvz1.com/c/202927/373449  forrk

https://jvz3.com/c/202927/194909  keysearch

https://jvz4.com/c/202927/296191  gluten free

https://jvz1.com/c/202927/286851  diet fitness diabetes

https://jvz8.com/c/202927/213027  writing job

https://jvz6.com/c/202927/108695  postradamus

https://jvz1.com/c/202927/372094  stoodaio

https://jvz4.com/c/202927/358049  profile mate

https://jvz6.com/c/202927/279944  senuke

https://jvz8.com/c/202927/54245   asin

https://jvz8.com/c/202927/370227  appimize

https://jvz8.com/c/202927/376524  super backdrop

https://jvz6.com/c/202927/302715  audiencetoolkit

https://jvz1.com/c/202927/375487  4brandcommercial

https://jvz2.com/c/202927/375358  talkingfaces

https://jvz6.com/c/202927/375706  socifeed

https://jvz2.com/c/202927/184902  gaming jobs

https://jvz6.com/c/202927/88118   backlink indexer

https://jvz1.com/c/202927/376361  powrsuite

https://jvz3.com/c/202927/370472  tubeserp

https://jvz4.com/c/202927/343405  PR Rage

https://jvz6.com/c/202927/371547  design beast

https://jvz3.com/c/202927/376879  commission smasher

https://jvz2.com/c/202927/376925  MT4Code System

https://jvz6.com/c/202927/375959  viral dash

https://jvz1.com/c/202927/376527  coursova

https://jvz4.com/c/202927/144349  fanpage

https://jvz1.com/c/202927/376877  forex expert

https://jvz6.com/c/202927/374258  appointomatic

https://jvz2.com/c/202927/377003  woocommerce

https://jvz6.com/c/202927/377005  domainname marketing 

https://jvz8.com/c/202927/376842  maxslides

https://jvz8.com/c/202927/376381  ada leadz

https://jvz2.com/c/202927/333637  eyeslick

https://jvz1.com/c/202927/376986  creaite contentcreator

https://jvz4.com/c/202927/376095  vidcentric

https://jvz1.com/c/202927/374965  studioninja

https://jvz6.com/c/202927/374934  marketingblocks

https://jvz3.com/c/202927/372682  clipsreel

https://jvz2.com/c/202927/372916  VideoEnginePro

https://jvz1.com/c/202927/144577  BarclaysForexExpert

https://jvz8.com/c/202927/370806  Clientfinda

https://jvz3.com/c/202927/375550  Talkingfaces

https://jvz1.com/c/202927/370769  IMSyndicator

https://jvz6.com/c/202927/283867  SqribbleEbook

https://jvz8.com/c/202927/376524  superbackdrop

https://jvz8.com/c/202927/376849  VirtualReel

https://jvz2.com/c/202927/369837  MarketPresso

https://jvz1.com/c/202927/342854  voiceBuddy

https://jvz6.com/c/202927/377211  tubeTargeter

https://jvz6.com/c/202927/377557  InstantWebsiteBundle

https://jvz6.com/c/202927/368736  soronity

https://jvz2.com/c/202927/337292  DFY Suite 3.0 Agency+ information

https://jvz8.com/c/202927/291061  VideoRobot Enterprise

https://jvz8.com/c/202927/327447  Klippyo Kreators

https://jvz8.com/c/202927/324615  ChatterPal Commercial

https://jvz8.com/c/202927/299907  WP GDPR Fix Elite Unltd Sites

https://jvz8.com/c/202927/328172  EngagerMate

https://jvz3.com/c/202927/342585  VidSnatcher Commercial

https://jvz3.com/c/202927/292919  myMailIt

https://jvz3.com/c/202927/320972  Storymate Luxury Edition

https://jvz2.com/c/202927/320466  iTraffic X – Platinum Edition

https://jvz2.com/c/202927/330783  Content Gorilla One-time

https://jvz2.com/c/202927/301402  Push Button Traffic 3.0 – Brand New

https://jvz2.com/c/202927/321987  SociCake Commercial

https://jvz2.com/c/202927/289944  The Internet Marketing Newsletter PLR Monthly Membership

https://jvz2.com/c/202927/297271  Designa Suite License

https://jvz2.com/c/202927/310335  XFUNNELS FE Commercial Drag-n-Drop Page Editor

https://jvz2.com/c/202927/291955  ShopABot

https://jvz2.com/c/202927/312692  Inboxr

https://jvz2.com/c/202927/343635  MediaCloudPro 2.0 – Agency Rights

https://jvz2.com/c/202927/353558  MyTrafficJacker 2.0 Pro+

https://jvz2.com/c/202927/365061  AIWA Commercial

https://jvz2.com/c/202927/357201  Toon Video Maker Premium

https://jvz2.com/c/202927/351754  Steven Alvey’s Signature Series 3rd Installment

https://jvz2.com/c/202927/344541  Fade To Black

https://jvz2.com/c/202927/290487  Adsense Machine

https://jvz2.com/c/202927/315596  Diddly Pay’s DLCM DFY Club

https://jvz2.com/c/202927/355249  CourseReel Professional

https://jvz2.com/c/202927/309649  SociJam System

https://jvz2.com/c/202927/263380  360Apps Certification Masterclass

https://jvz2.com/c/202927/359468  LocalAgencyBox

https://jvz2.com/c/202927/377557  Instant Website Bundle

https://jvz2.com/c/202927/377194  GMB Magic Content

https://jvz2.com/c/202927/376962  PlayerNeos VR

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: