Central banks should track impact of war on inflation, says IMF

The economic consequences caused by the war between Russia and Ukraine are already quite present and could intensify even more with the prolongation of the conflict, said this Saturday (5) the IMF (International Monetary Fund).

In a report that assesses the global macroeconomic impacts of conflicts in Eastern Europe, the IMF highlights the increase in agricultural commodity prices and inflation, which put even more pressure on economies that were already experiencing high price indices.

“Monetary authorities will have to carefully monitor the pass-through of the increase in international prices to domestic inflation, to calibrate the appropriate responses,” reads the statement published by the IMF.

The body also says that Ukraine has made an emergency request of US$1.4 billion (R$ 7.1 billion), which is expected to be evaluated next week.

According to the International Monetary Fund, “price shocks will have a widespread impact, especially on lower income groups, where food and transport expenditures represent a larger proportion of total expenditures. would be even more devastating.”

The IMF recalls that the Russian attacks caused a wave of about 1 million refugees to countries neighboring Ukraine.

“In Ukraine, in addition to the human cost, the economic damage is already substantial. Ports and airports are closed and have been damaged and many roads and bridges have been damaged or destroyed. It is clear that Ukraine will face significant recovery and reconstruction costs.”

Also according to the IMF document, “sanctions on Russia will also have a substantial impact on the global economy and financial markets, with significant repercussions for other countries.”

The fund assesses that the announced sanctions against the Central Bank of Russia will severely restrict the local monetary authority’s access to international reserves in order to support the Russian currency, the ruble, and the financial system in general.

“International sanctions on Russia’s banking system and the exclusion of several banks from the Swift system have significantly disrupted Russia’s ability to receive payments for exports, pay for imports and carry out financial transactions across its borders. the full impact of these sanctions, we have already seen a sharp drop in asset prices as well as the exchange rate.”