According to Daly, to date, there is no reason for the Fed to slow down on its interest rate hike plan.
Evercore ISI’s Krishna Guha said in a note on Thursday that “Normally geopolitical crises ultimately turn out to be a fade for financial markets and a buying opportunity for investors willing to look past the headlines.”
The political effect of the invasion and the ensuing soaring energy prices “will complicate the ability of central banks on both sides of the Atlantic to engineer a soft landing from the pandemic inflation surge.”
Economic Impact
Experts agree that channeling the economy into a recovery path while avoiding recession is bound to become a more difficult task under increasing prices —the considerable readjustment of monetary policies amid the conflict will also be a barrier.
While previous Fed responses to global unrest have involved deflating interest rates to make money more accessible, the present situation poses a different challenge.
In an analysis note, Goldman Sachs asserted that “The current situation is different from past episodes when geopolitical events led the Fed to delay tightening or ease because inflation risk has created a stronger and more urgent reason for the Fed to tighten today.”
