The effects of Ukraine-Russian war on Inflation expectations

Abstract

This study investigates the impact of the recent Ukraine-Russia conflict on inflation expectations in the United States, emphasising both short-term and long-term effects. Utilising data from the Survey of Consumer Expectations, the Bureau of Labor Statistics, the Federal Reserve Economic Data, and the U.S. Energy Information Administration, the research focuses on the repercussions of this geopolitical event on key economic indicators. The analysis encompasses the effects of oil prices and the Real Broad Effective Exchange Rate (RBEER) on one and three-year-ahead inflation expectations. Our findings indicate that in the short term, U.S. inflation expectations are indirectly influenced by oil price fluctuations rather than directly by the conflict or changes in the RBEER. In the long term, however, these influences do not significantly alter inflation expectations, suggesting the non-persistent nature of such shocks. This research contributes to the understanding of the complex interplay between geopolitical turmoil and economic sentiment in a major economy, offering insights valuable for policymakers and economic analysts