A reader, critiquing the argument that the expanded Russian invasion of Ukraine couldn’t clarify accelerating inflation earlier than February 2022, observes “The surge of inflation occurred properly earlier than the warfare.” I don’t assume this characterization is fully correct, however in any case, oil costs rose earlier than the so-called “Particular Army Operation”, and value pressures confirmed up concurrently.
First, take into account oil costs (Brent) and Geopolitical Danger as measured by Caldara-Iacoviello GPR index.
Determine 1: Oil value (Brent), $/bbl (blue, left scale), GeoPolitical Danger index (pink, proper scale). Crimson dashed line at 2022M02, Russian invasion. Supply: EIA by way of FRED, Caldara-Iacoviello.
Discover that oil costs began rising even earlier than the invasion; anxieties about Russian actions had been rife as of November, so that is unsurprising. In different phrases, cost-push pressures rose earlier than Russian tanks truly moved additional into Ukraine.
Determine 2: Oil value (Brent), $/bbl (blue, left scale), HP cyclical part of log CPI (tan, proper scale). Crimson dashed line at 2022M02, Russian invasion. Supply: EIA by way of FRED, CPI, and writer’s calculations.
The graph signifies that the CPI was 2% above HP development by June 2022.
A reader, critiquing the argument that the expanded Russian invasion of Ukraine couldn’t clarify accelerating inflation earlier than February 2022, observes “The surge of inflation occurred properly earlier than the warfare.” I don’t assume this characterization is fully correct, however in any case, oil costs rose earlier than the so-called “Particular Army Operation”, and value pressures confirmed up concurrently.
First, take into account oil costs (Brent) and Geopolitical Danger as measured by Caldara-Iacoviello GPR index.
Determine 1: Oil value (Brent), $/bbl (blue, left scale), GeoPolitical Danger index (pink, proper scale). Crimson dashed line at 2022M02, Russian invasion. Supply: EIA by way of FRED, Caldara-Iacoviello.
Discover that oil costs began rising even earlier than the invasion; anxieties about Russian actions had been rife as of November, so that is unsurprising. In different phrases, cost-push pressures rose earlier than Russian tanks truly moved additional into Ukraine.
Determine 2: Oil value (Brent), $/bbl (blue, left scale), HP cyclical part of log CPI (tan, proper scale). Crimson dashed line at 2022M02, Russian invasion. Supply: EIA by way of FRED, CPI, and writer’s calculations.
The graph signifies that the CPI was 2% above HP development by June 2022.