Inflation has surged sharply in March, according to the latest data from India, the United Kingdom and the United States, but that does not reflect the full impact of the ongoing Russia-Ukraine war, suggesting that the risks are skewed more to the upside for price pressures globally.
Soaring energy and food costs from the Ukraine conflict have driven up price pressures across countries.
India reported inflation at a 17-month high of 6.95 per cent, the US inflation surged to a four-decade high of 8.5 per cent, and in the UK, the inflation rate rose to a three-decade high of 6.2 per cent in March.
While that data suggests blow-out inflation numbers across countries, those figures do not yet fully reflect the fallout of the Ukraine conflict, as Russia invaded Ukraine late in March.
The already disrupted global supply chains from the pandemic have been distorted further since Russia invaded Ukraine on March 22 and the sanctions on Moscow by Western countries in retaliation.
Since Russia invaded Ukraine on February 24, global crude prices have jumped, with the international benchmark Brent futures hitting a multi-decade high of nearly $140 a barrel last month.
While crude costs have eased from those highs, with benchmark futures contracts falling for a second straight week, International oil prices have remained above $100 per barrel since Moscow attacked Ukraine.
Elevated global crude prices have sparked worries of runaway inflation.
With no end in sight for peace talks between Russia and Ukraine and Western countries attempting to isolate Moscow, the risk is that prices of commodities, energy and food would continue to remain high or push up even further, causing inflation to flare even further.
While inflation has been rising since last year, which most major central banks said was transitory, the Russia-Ukraine war has exasperated the price pressures even further.
That is likely to force most major central banks to adopt an aggressive monetary tightening policy and thereby hurt economic growth.
The US Federal Reserve is widely expected to be the most aggressive based on the expected policy tightening path. That has pushed the dollar higher and hurt currencies on the other side of the exchange rate.
The dollar strength is likely to cause a widespread and large-scale economic crisis in countries with low foreign exchange reserves at a time of global rise in commodity prices and hurt import-reliant nations.
The economic crisis in Sri Lanka is a prime example of the fallout from the Ukraine war, with Nepal not too far behind based on recent reports.
Global recession risks have also risen from the ongoing Russia-Ukraine war, with stagflation a reality in most countries and no longer only a threat.