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Geopolitical risk and the economic ramifications of conflict are being felt far and wide whilst Ukrainian President Volodymyr Zelensky continues to seek a peaceful resolution.

Posted: 29th March 2022   |   Share

By Sarah Ryman

Sarah Ryman News

UK

 The UK economy had seen a bit of a rebound in January post the damaging effect of Omicron but the outlook for growth does not look very rosy with the war in Ukraine weighing heavily on hearts and economies.  Fuel inflation is eating into household expenditure at a time when inflationary pressures were already mounting, commodity prices have shot up and there will likely be further impact to supply chains.  Living standards and growth will undoubtedly be impacted and inflation is now predicted to hit 8% by the end of June and peak in double digits (prices rose by 6.2% in the 12 months to February).  The Bank of England has tried to temper inflation raising interest rates up by a further 0.25% to 0.75% reaching the pre-pandemic level and marking the third consecutive rate rise. 

 EUR

 With the fear that the war in Ukraine could drag Europe into recession and inflation spiralling upwards the European Central Bank (ECB) will likely need to be sensitive to managing the fiscal balancing act.  Consumer prices in the Eurozone have now hit a record annual pace of 5.8% in February and the central bank has presented plans for a quicker reduction in its asset purchase plans this year. 

 According to opinion polls Emmanuel Marcon seems likely to win another five year term as French president but this perhaps conceals some of the uncertainty of voters.  Pollsters are also commenting that a third of the voting populous have no plan to vote given the complaints of the far right and left. 

 US

 The jobless rate in the US dropping alongside elevated inflation (now at a 40 year high) has led the Federal Reserve to respond by raising interest rates for the first time since 2018 this month.  The market is anticipating this will be the first of a number of hikes aimed at managing inflation.  Jay Powell, the Fed chair has kept the door open to raising interest rates by larger increments and the ‘dot-plot’, which provides an indication of interest rate projections, now shows 6 rate rises in 2022 and a further three in 2023. 

 

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