Russia’s invasion of Ukraine will likely hit economic growth globally and here at home.
“The Russia-Ukraine crisis is viewed as a negative growth shock for the global economy,” said National Association of Business Economics President David Altig, executive vice president and director of research, Federal Reserve Bank of Atlanta, following a new NABE survey released Monday . “With 47% of respondents indicating global growth will be reduced by more than 0.5%” he added.
The survey, one of two planned for this year, was conducted between March 1 and 8 and pulsed 234 NABE members
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That would impact the International Monetary Fund’s global forecast of 4.4% growth which is down from 5.9% in 2021.
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Plus, the majority of NABE economists see inflation staying above 3% through 2023. Consumer prices rose in February by 7.9%, the highest since 1982, while producer prices jumped 10%, the highest on record.
The lion’s share of inflation is coming from energy prices. Oil closed at $104.70 last week and has gained over 39% this year pushing national gas prices to just under $4.30 per gallon, according to AAA. In California, prices are approaching $6 per gallon.
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Additionally, the Federal Reserve is also growing more concerned about the Russia-Ukraine conflict, noting that it will likely “create additional upward pressure” as disclosed in the Fed’s policy statement last week after it raised the benchmark Federal Funds rate by 25 basis points, the first hike in three years.
Policymakers also cut annual US GDP estimates to 2.8% from 4%, in part because of the uncertainty tied to the Ukraine war.
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“I think some of that is just an early assessment of the effects of spillovers from the war in Eastern Europe, which will hit our economy through a number of channels. Highly uncertain but, you know, you’re looking at higher oil prices, higher commodity prices” said Federal Reserve Chairman Jerome Powell during his Q&A with reporters.
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“We think that will weigh on GDP to some extent. So that’s part of what moved the assessments down,” he explained.