This means that the invasion can have a double effect – slowing economic activity and raising prices.
In the US, the Federal Reserve is already facing the highest rate of inflation in 40 years, by 7.5 percent In January, it is expected to start raising interest rates next month. The high energy prices caused by the conflict in Europe may be temporary, but it may feed fears about the spiral of wages and prices.
“We could see a new wave of inflation,” said Christopher Miller, visiting fellow at the American Enterprise Institute and adjunct professor at Tufts University.
Inflation fears are also fueling potential shortages of base metals such as palladium, aluminum and nickel, further disrupting global supply chains already reeling from the pandemic, Truck driver blockade in Canada and a shortage of semiconductors.
price PalladiumFor example, used in car exhaust systems, cell phones and even dental fillings, has surged in recent weeks due to concerns that Russia, the world’s largest exporter of the metal, could be cut off from global markets. The price of nickel, used to make steel and electric car batteries, also jumped.
It’s too early to gauge the exact impact of an armed conflict, said Lars Stenkvist, chief technology officer of Swedish truck maker Volvo. But he added, “It’s very dangerous.”
“We have a number of scenarios on the table as we follow the development of the situation day by day,” Mr. Steinqvist said Monday..
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