Countries Use Interest Rates To Tackle War-Driven Supply Shocks

Key facts

• Central banks in several countries hiked interest rates.
• These hikes were a response to commodity shocks.
• The Russia-Ukraine war created a similar commodity shock situation.
• The strategy aimed to tackle war-driven supply shocks.

The Russia-Ukraine war has introduced significant commodity shocks, mirroring a situation that occurred four years prior. In response to these disruptions, central banks in numerous countries implemented interest rate hikes. This monetary policy action was taken as a measure to address and mitigate the inflationary pressures stemming from these war-driven supply shocks.