The human toll of Russia’s invasion of Ukraine is shocking and incalculable. It’s hard to think of Putin as anything but a monster.
There’s also an economic cost. Putin is destroying Ukraine and as for what he’s doing to Russia, that can only be described as financial suicide. Then there’s the harm he’s inflicting on the rest of the world, including the U.S.
Russia’s invasion — and now the added concern about a broader conflict and even WMDs — throws a massive shadow over the global economy. It’s a watershed event really, with BlackRock CEO Larry Fink writing in his letter to shareholders he believes “the Russian invasion of Ukraine has put an end to... globalization...”
The specific impact of the conflict is actually up for debate — with huge consequences for government officials, investors and the rest of us. The question can be boiled down to this: Is inflation the primary economic concern of the invasion (as war drives up prices of oil, wheat oil and fertilizer)? Or is it a drag on the global economy, (as war slows down business activity)? Or both?
Consider Fed chief Jay Powell. Before the Ukraine crisis, the Fed was fixated on fighting inflation — which had leapt 7.5% in January. As such, there was a consensus expectation the Fed would raise its benchmark rate by a hefty 50 basis points (or half of one percentage point). But once Putin barged into Ukraine, uncertainty gripped the financial markets and the expectation dropped to a quarter point hike, which is exactly what Powell announced on March 16.