Economy

Russia will stop supplying gas to countries it considers “unfriendly” unless they pay in roubles, according to a presidential decree effective immediately.Buyers in 48 countries, including the EU, will be required to open a bank account both in foreign currency and in roubles at Gazprombank in Russia, according to the decree published on Thursday. The targets are countries that have established sanctions against Russia’s economy, governing and business elite for its invasion of Ukraine.Vladimir Putin on Thursday said Russia was establishing “a clear and transparent scheme” for these foreign customers. “If such payments are not made, we will consider this a default on the part of the buyers — with all the ensuing consequences,” he added during a speech at the Kremlin. The decision and the threat of supply disruptions, largely mooted by Russia’s president in the past week, have triggered alarm among European countries that rely heavily on Russian gas. Germany on Wednesday said it was preparing for energy rationing.Putin gave the central bank, the customs authorities and the government 10 days to implement the new system. Because most April deliveries-related payments are not expected until early or mid-May, the decree will effectively be tested next month.Olaf Scholz, Germany’s chancellor, said on Thursday he had told Putin that his country had checked its contracts with Russia for gas deliveries and would keep paying for them in euros and sometimes dollars.Bruno Le Maire, France’s finance minister, speaking at a press conference with Robert Habeck, his German counterpart, said France and Germany were preparing for all scenarios, including Russia cutting off gas deliveries to Europe. Both also expressed opposition to paying for gas deliveries in roubles.“The contracts include provisions that stipulate the currency they must be settled in and therefore the contracts must be settled in that currency,” Le Maire said.

A French finance ministry official said that the decree did not seem to change much as the contracts would still be paid in euros to Gazprom, which would then switch the payment over to roubles. But “given the uncertainties, we are preparing contingency plans for gas supplies”, the official added.“Russian dictator Vladimir Putin has decided to further escalate the economic war with Europe,” Jozef Síkela, Czech Republic industry minister, wrote on Twitter. “We cannot let ourselves be blackmailed, we cannot help him circumvent anti-Russian sanctions like this. On the contrary, we must demand compliance with valid contracts.” He added that the country had one month’s worth of gas and 90 days’ worth of oil reserves in storage.The German Eastern Business Association, which promotes trade links with eastern European states, called on Russia “to respect existing gas supply contracts without changes”. “By making unilateral changes, Russia is jeopardising decades of energy relations with Germany and the EU, and accelerating the demise of this business model,” it added.The reason for switching the payments to roubles was the weaponisation of the western financial system, Putin said.

“When companies from these countries refuse to fulfil contracts with Russian banks, enterprises, individuals, when assets in dollars and euros are frozen, it makes no sense to use the currencies of these countries,” he added.“The transfer of payments for Russian gas supplies to Russian roubles is an important step towards strengthening our financial and economic sovereignty.” Russia would strive to use its currency as payment for other exports, Putin added.“We will continue to consistently and systematically move in this direction as part of a long-term plan, to increase the share of foreign trade settlements in the national currency and the currencies of those countries that are reliable partners.” Additional reporting by Harry Dempsey and Olaf Storbeck More

When it comes to defining the “benefits of Brexit” there is a long tradition of trumpeting the benefits that would flow from escaping the stultifying regulatory orbit of the EU — or “slashing Brussels red tape”, in the conventional tabloid shorthand.But in truth this notion of a “deregulatory dividend” was always something that existed more in the imaginations of Brexiters and the Conservative right, than in reality.And there was forewarning. When David Cameron commissioned the “balance of competences” review in 2012 to systematically audit the impact of how EU regulation affected the UK, the results (contained in 32 meaty reports) sank without political trace.Had there been an obvious dividend, you can bet your bottom euro that you’d have heard about it at the time among those arguing the case for Brexit. But the reports didn’t provide the anticipated ammunition.That’s because while the EU was far from perfect, its regulatory systems did undergird the EU single market — so the findings called for “less and better” regulation, not the wholesale ripping up of an increasingly seamless pan-EU trading system.The UK leaving the EU did not dismantle this ecosystem, it just removed the UK’s voice from its creation. Nor did Brexit reduce the importance of the EU to UK trade — as recent trade figures comparing the UK with other G7 countries show (see chart below). So after Brexit, the EU’s regulatory juggernaut rumbled off into the distance, leaving Brexiters on the roadside trying to describe a unilateral deregulatory dividend that — six years after the vote to leave — they have still been unable to properly articulate, let alone enact. That Brussels juggernaut moves reasonably slowly, but a year into Brexit proper, we are starting to see the regulatory gaps beginning to open up between the UK and Brussels, and questions being asked about how to manage these.The latest (third) edition of the UK in a Changing Europe’s divergence tracker throws up two or three interesting examples of where the UK is having to decide whether or not to align with new EU rules — or go its own way.The first is an EU update to its “pharmacovigilance” regulations — the way in which medicine-related adverse effects are reported by industry — which means the UK and the EU now have different systems.That bites immediately in Northern Ireland (which must follow EU rules) but also begs the question about whether there’s any advantage for the UK not following suit, given the size and nature of UK vs EU markets where the same drugs or veterinary medicines are used.A consultation is being promised by UK government on how to proceed, but until there is a result — and ministers take a decision — there is what Joël Reland, the author of the tracker, calls an “airgap” between the EU and UK regulatory systems.Similarly, new EU car safety rules enter into force this summer which, among other things, will make cars safer for women. Given the nature of UK car manufacturing supply chains — where EU sales and exports are fundamental to the viability of UK production — the industry is very clear it would like to align with the EU but is still waiting for ministers to formally decide. Auto industry insiders express frustration. The new EU rules kick in from July 6, but there is only medium confidence that the “airgap” will be closed before then, as Whitehall struggles to find the bandwidth to engage with the sheer volume of EU divergence. Of course, these examples are only the beginning — UK industry will soon have to wrestle with a new EU battery regulation that will set the terms for performance and recycling, as well as data management regulations (that will affect driverless cars). Across a huge range of industries, this is the actual story of managing the fallout of the regulatory freedom from Brussels that was delivered by Brexit — what Reland terms the constant “passive divergence” that occurs when the EU moves, and the UK stands still.This bites hardest and most immediately in Northern Ireland, which must follow EU rules as part of the post-Brexit trade arrangements and so is wrestling immediately with managing dual regulatory regimes on “pharmacovigilance”, for example. Brexiters are quick to highlight this new regulatory divide within the UK internal market as an argument for the Northern Ireland protocol being “untenable” — and there are 29 other regulatory areas where divergence is also coming.But narrow point-scoring on the protocol is to obscure the far broader challenge about how the UK systematically manages the continuous process of divergence from the EU.As Reland puts it: “It’s a job for life, horizon-scanning, and looking at often quite small practical changes business has to make, and it’s always going to be there, lurking in the background.”That job requires bandwidth both within industry and government as the post-Brexit UK tries to build the regulatory capacity to make these decisions — that means installing new people and processes across a vast array of industries, from toys to building supplies; chemicals to medicines and medical devices. Given the intermediate nature of UK manufacturing and the continued importance of the EU to UK trade, the positive case for active divergence will be much harder to make than the “slash Brussels red tape” agenda would have the public believe. Whitehall insiders confirm what industry well knows from recent experience dealing with government — that there is currently no systematic approach to addressing these questions. No one is sitting in Whitehall with a spreadsheet, identifying upcoming EU regulatory changes and doing the cost-benefit analysis on aligning or diverging.Indeed, as one insider puts it, a systematic approach of that kind would positively be “viewed with suspicion” by the current government, which often likes to say that the civil service needs to break the mindset of “EU regulatory capture” that comes from dealing with Brussels for the past 40 years.The result, concludes Reland, is that the UK approach on divergence thus far is “patchy”, with little sign that anyone is really engaging in the “unglamorous work on monitoring and deciding how to respond systematically to EU regulations — where alignment should be sought or not”. Do you work in an industry that has been affected by the UK’s departure from the EU single market and customs union? If so, how is the change hurting — or even benefiting — you and your business? Please keep your feedback coming to [email protected] in numbersIt will not have penetrated far beyond the confines of Westminster, but there was an interesting little moment this week when the chancellor Rishi Sunak accepted that Brexit was the likely cause of the UK’s dismal trade performance relative to other G7 countries.It was nothing more than a statement of the obvious, but it was a rare admission from one of the big beasts of the cabinet that the trade frictions imposed by Brexit are costing the UK. To the point of last week’s newsletter, Boris Johnson returned to the official script later in the week by declaring (when asked about that same performance) there was “no natural impediment” to UK exports that “will and energy and ambition” could not overcome. No one should expect an overnight change, but when you look at what Sunak said — and the reporting around the Spring Statement — then drip by drip the top-line effects of Brexit are perhaps starting to feed into the wider political conversation.And, finally, four unmissable Brexit storiesNigel Farage was caught up this week in a controversy involving a Dutch carbon offsetting company. The former Brexit champion is in line to gain up to €18.5mn from share options he owns in Dutch Green Business if the share price rises from the current €1 to €20.The cumulative costs of Brexit are piling up for Boris Johnson, writes Philip Stephens. The damage done by the Johnson premiership to the nation’s economy, its political fabric and its standing abroad have been immense but becoming “normal” again will not be easy, he concludes.There’s an obvious temptation in the EU to feel schadenfreude about the UK’s content-free Brexit triumphalism, writes Alan Beattie as he bemoans the impact of Brexit on UK-EU trade. But he warns EU trade policy is at serious risk of protectionist drift.New columnist Stephen Bush writes about the fascinating shift in the role of female voters in British politics. For most of the 20th century, he writes, women were more likely than men to back parties of the right across the democratic world. Today, however, it is the other way round. Stephen explains what is driving the switch. More

Four years ago, Peter Navarro, then economic adviser to US president Donald Trump, summoned me to the White House to discuss a report he had initiated with the un-catchy title “Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States”.My initial (misguided) reaction was to joke that it “seemed very retro”. Navarro was, in essence, arguing that government and companies had to realise the risks of using non-American supply chains — and rapidly co-ordinate to create domestic alternatives. But this type of government meddling — with its anti-globalisation stance — seemed almost quaint then, given the post-cold war ethos of Wall Street capitalism. No longer. Last week Larry Fink, head of BlackRock, warned that “the Russian invasion of Ukraine has put an end to the globalisation we have experienced over the last three decades”. This week the White House invoked Korean war-era powers to boost supplies of battery minerals such as lithium, nickel and cobalt. Meanwhile Intel, the US chip group, is touting plans to boost production in Germany and Ohio. Whether or not you espouse Navarro’s mercantilist creed (and I do not), these ideas are now resurfacing in the Biden administration, with a vengeance. So, what does this mean for investors? Judging from recent conversations with C-suite executives, there are at least three practical implications. The first is that a radical “what if” mindset is reshaping scenario planning around supply chains. No, this does not mean that companies are reshoring all production; as the economic historian Adam Tooze argues, Fink’s prediction about the end of globalisation still seems a bit overblown. But boards are now envisaging once-unimaginable tail risks and repositioning.Consider chips. US executives have theoretically known for years that modern industry is highly — dangerously — dependent on Taiwan; the Taiwan Semiconductor Manufacturing Company has a 53 per cent share in the global semi conductor foundry market and 92 per cent for advanced chips. Until recently, though, few companies actively created contingency plans for a scenario in which, for example, Taiwan’s supply could collapse because of a Chinese invasion. “But now we are actively thinking about this [Taiwan risk],” the chief financial officer of one gigantic American company tells me. That is partly because pandemic disruptions highlighted fragilities when chip shortages forced some of the US and European auto sector to halt production. Meanwhile the Russian invasion has made it easier to visualise an assault on Taiwan. This seems unlikely in the short term, since Putin’s problems in Ukraine have given Beijing a salutary lesson about the risks of military attacks. Yet it remains a medium-term risk and China will hone its planning to avoid Russia’s mistakes, says David Sacks of the Council for Foreign Relations. He notes that “despite the world’s reliance on Taiwan’s semiconductors, there isn’t any realistic plan or option to diversify chip sourcing yet”. This is prompting a second shift: stockpiling. A decade ago, words like “efficiency” and “streamlining” were all the rage. Now there is a newfound realisation that resilience requires redundancies, ie slack and bigger inventories. It is not easy for companies to achieve this, given strains in warehousing and supplies. US commerce department data suggests companies only have five days’ worth of chip inventories right now, down from 40 in 2019. But the stockpiling aspiration is there, hence the fact that inventory increases accounted for 4.9 percentage points of American growth at the end of last year.The third shift is that companies are now looking at supply chains with lateral, rather than tunnel, vision. A decade ago, procurement managers typically developed their strategies based on the principles of individual rational self-interest, profit maximisation and efficiency. But the 2008 financial crisis showed that what seems “rational” for an individual can be irrational for a group; when investors all tried to reduce their risks by hedging with AIG, that created a single point of failure — and more risk. The same lesson is being learnt now for supply chains: if every company uses the same transport nodes in search of “efficiency”, this creates new bottlenecks. Group dynamics matter.That has already prompted government interventions in the realm of chips: the White House has created an “Early Alert System” to “[bring] industry together and encourage increased transparency throughout the supply chain.” In truth, this does not work particularly well (yet). But the messaging is clear: supply chain data is no longer just a matter driven by proprietary interests. And the initiative is likely to spread beyond chips or metals; Navarro’s 2018 report detailed numerous high and low tech items that face supply chain fragilities, ranging from carbon fibres to chaff. There are, inevitably, big downsides to these three shifts: even a modest return to a world of corporate reshoring, redundancies and government meddling will be inflationary, as Fink notes. That is also very retro. But the main point now is that events in Ukraine have shown that it is even more costly to ignore “what if” scenarios. The C-suite executives of America will not forget this again soon; nor should investors. [email protected] More

Websites for some of Britain’s biggest energy companies crashed on Thursday as consumers worried about the escalating cost of living crisis rushed to submit gas and electricity readings ahead of a 54 per cent rise in prices from April 1.Consumer champions including Martin Lewis, founder of the Money Saving Expert website, have been advising households to submit their meter readings before Britain’s “energy price cap” rises by almost £700 to £1,971 a year on average from Friday. The cap dictates bills for the 22mn households not on fixed-price energy deals.But websites and phone lines for some of the country’s biggest energy providers, including British Gas, EDF Energy, Eon and ScottishPower, were unable to cope with the increased traffic on what had been dubbed national “meter reading day”, drawing criticism from consumer groups that companies had been aware that many households would require advice.“Energy companies should have been prepared for higher numbers of customers getting in touch and should support any customers trying to submit their meter readings today,” said Adam French, consumer rights editor at Which?, the consumer group.Greg Jackson, chief executive of Octopus Energy, Britain’s fifth-biggest energy provider, said on Twitter that his company had 2,500 calls waiting just before lunchtime on Thursday compared with 150 on a “normal busy day”. But Jackson insisted that customers had five days to submit their readings. Justina Miltienyte, head of policy at the price comparison site Uswitch.com, said supplier website issues were often temporary so consumers should try again later. In the meantime, they should take a photo of their readings “with a date stamp visible in the image as evidence”, Miltienyte said.Emma Pinchbeck, chief executive of Energy UK, a trade body for suppliers, said the panic proved how “scary these price rises are” for households, not just those on low incomes, and that “more needs to be done” to help protect consumers against high gas prices. Prices were high even before Russia’s assault on Ukraine but the volatility in commodity markets has since increased.

Chancellor Rishi Sunak in February announced a £9bn package to help with the cost of living crisis. This included a £150 council tax rebate, to be paid in April, for each property in England in bands A to D and a £200 loan to be applied to all electricity bills in October. But the measures have been branded inadequate by opposition politicians and consumers groups, particularly given the price cap is forecast to rise again steeply in October. The UK’s fiscal watchdog, the Office for Budget Responsibility, said last week that it expected the cap to rise to more than £2,800 a year per household in October based on average usage, although some analysts forecast it will hit £3,000. National Energy Action, a charity, said it believed 6.5mn households in Britain were living in “fuel poverty”, up from a previous estimate of 4mn at the start of October. If the price cap hits £3,000 a year in October, the NEA warned as many as 8.5mn households would not be able to afford their energy and heating bills. “This is the biggest energy price shock in living memory,” said Adam Scorer, chief executive of National Energy Action, a charity. More

WASHINGTON — The Treasury Department on Thursday leveled new sanctions on Russian technology companies and illicit procurement networks that the country is using to evade existing sanctions, expanding the Biden administration’s effort to punish Russia for its invasion of Ukraine by crippling its economy.The new measures reflect the challenge that the United States and its allies continue to face in enforcing restrictions that have been imposed to cut off Russia’s central bank, financial institutions and oligarchs from the global financial system, and the need to disrupt Russian supply chains and efforts to conceal transactions.“Russia not only continues to violate the sovereignty of Ukraine with its unprovoked aggression, but also has escalated its attacks striking civilians and population centers,” the Treasury secretary, Janet L. Yellen, said in a statement. “We will continue to target Putin’s war machine with sanctions from every angle until this senseless war of choice is over.”Among the 34 organizations and individuals targeted are Serniya and Sertal, Moscow-based companies that illicitly procure dual-use equipment and technology for Russia’s defense sector.The Treasury Department is also imposing sanctions on several technology companies that produce computer hardware, software and microelectronics that are used by Russia’s defense sector. Among them is Joint Stock Company Mikron, Russia’s largest chip-maker.Adewale Adeyemo, the deputy Treasury secretary, foreshadowed the sanctions during a speech on Tuesday, when he said that Russia’s military industrial sector would be the next to face restrictions.“We are planning to target additional sectors that are critical to the Kremlin’s ability to operate its war machine, where a loss of access will ultimately undermine Russia’s ability to build and maintain the tools of war that rely on these inputs,” Mr. Adeyemo said in his speech at Chatham House, an international affairs think tank in London. “In addition to sanctioning companies in sectors that enable the Kremlin’s malign activities, we also plan to take actions to disrupt their critical supply chains.” More

Inflation continued to run at the fastest pace in 40 years in February, fresh data released on Thursday showed, at a moment when war in Ukraine and continued supply chain disruptions tied to the coronavirus promise to keep prices rising.Prices, as measured by the Personal Consumption Expenditures Index, rose by 6.4 percent in the year through February, the fastest inflation rate since 1982. They climbed 5.4 percent after stripping out food and fuel costs, which can be volatile, the data showed.That pace of increase is far faster than the 2 percent annual inflation that the Federal Reserve targets. While central bankers expect today’s rapid inflation to cool by the end of the year, falling to 4.3 percent by the final three months of 2022, that pace of increase would still be too quick for comfort.Central bankers began raising interest rates earlier this month, lifting them by a quarter percentage point, and have signaled more to come as they begin to wage an assault on rising prices. By making borrowing more expensive, the Fed can weigh on demand, allowing supply to catch up and eventually temper price increases.“There is an obvious need to move expeditiously to return the stance of monetary policy to a more neutral level, and then to move to more restrictive levels if that is what is required to restore price stability,” Jerome H. Powell, the Fed chair, said during a recent speech.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve announced that it was raising interest rates for the first time since 2018.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.The Personal Consumption Expenditures figures follow a more timely inflation release — the Consumer Price Index — and tend to be easy to forecast, so they do not come as a surprise to Wall Street. But because the gauge is the Fed’s preferred inflation measure, the fresh figures reinforce the challenge that economic officials face.While policymakers are watching for any sign that inflation is slowing down or is about to cool off, so far there is little to suggest a meaningful pullback. Supply chains remained stressed, and recent shutdowns in China could pose further strain. Apartment rents are climbing, elevating housing costs. Workers are in short supply and wages are rising, which could bolster inflation in other service categories.Russia’s invasion of Ukraine pushed up oil and gas prices, along with other commodity costs, which is likely to further elevate inflation when March data are released. While a few days of gas price increases happened in February, the bulk of them came this month.Companies are trying to navigate the complicated moment, gauging whether input cost increases will continue for a second year — and whether and how to pass that on to consumers.Chewy, the pet goods retailer, recently signed a new freight contract that will cost it more this year; and in the final quarter of 2021, it also faced higher labor costs. But it is hoping that those trends do not last, or that it can offset the climbing expenses through efficiencies.“As we close the book on 2021 and move forward in 2022, we are already seeing improvements in labor availability, inbound shipping costs and pricing, while out-of-stock levels and outbound shipping costs remain elevated,” Sumit Singh, the firm’s chief executive officer, said on an earnings call this week. “Ultimately, we believe most of these challenges are not permanent in nature.”Inflation F.A.Q.Card 1 of 6What is inflation? More

BENGALURU (Reuters) – Global fund managers maintained a cautious stance in March, increasing recommended bond holdings and cash reserves and suggesting reduced equities exposure, a Reuters poll found. The March 21-31 survey captured this defensive strategy many fund managers adopted after the Russia-Ukraine war broke out. The February survey was taken partly before Russia’s Feb. 24 invasion but had still hinted at caution.Recommended equity allocations were lowered to an average of 48.5% of the model global portfolio of 35 fund managers and chief investment officers in the United States, Europe and Japan, the lowest since end-2020. It was at 49.5% in February.Equity markets have suffered from speculation the U.S. Federal Reserve would hike interest rates more aggressively than previously thought. But the S&P 500 has staged a quick rebound, up 11% since March 8, its biggest 15-day percentage gain since June 2020 when the market was recovering from a steep sell-off near the start of the COVID-19 pandemic.In the last month, asset managers increased their cash buffer to 4.5%, from 4.2%, the highest since November 2020.”Our view is markets are close to pricing in our central scenario, where the Federal Reserve continues on its policy tightening cycle and in turn reduces inflation without causing a significant growth slowdown,” said Craig Hoyda, senior quantitative analyst at abrdn.”However, we view risks as skewed to the downside, with risks of a global recession within the next two years as 20%-30%.”The spread between U.S. 2-year and 10-year Treasuries flashed signs of a recession on Tuesday when it briefly inverted before turning positive again.This inversion, when sustained, has previously been an accurate predictor of recession.Not all fund managers were as cautious, especially given the increase in inflation to multi-year highs in nearly every major economy. “In an inflationary environment, equities are the only large and liquid asset class accessible to all that can generate significant real returns,” said Christopher Rossbach, chief investment officer at J. Stern & Co. (Reporting and Polling by Tushar Goenka, Arsh Mogre in BENGALURU and Fumika Inoue in TOKYO; editing by Barbara Lewis) More

FRANKFURT (Reuters) -Inflation continued to surge across Europe’s biggest economies this month while growth took a hit, leaving households poorer as they picked up the bill for soaring energy costs in the wake of Russia’s shock invasion of Ukraine.Price growth hit multi-decade highs in Italy, France, Germany and Spain in March, intensifying a policy dilemma for the European Central Bank, which needs to fight the price surge but must also avoid choking off already fading growth.Inflation in Italy hit 7% while prices in France were up 5.1%, driven by soaring fuel and natural gas prices that typically impact poorer households more than others.The data, along with sky-high readings from Germany and Spain a day earlier, suggest that Friday’s euro zone reading will be well above 7%, with three to four months still left before a likely peak, according to the ECB. While most of the surge is due to energy prices, Europe’s labour market is also tighter than it has been for decades, suggesting that underlying price pressures are also starting to build and that wages will follow sooner or later.Euro zone unemployment fell to a record low 6.8% in February, separate data showed on Thursday, and a further drop is projected by the ECB.The conflict between Ukraine and Russia, which are both major grains producers, is also likely to push up prices of some staple foods. “Given the rise in inflation is almost exclusively driven by the supply side, the higher inflation gets, the weaker economic growth will be,” ABN Amro analysts said in a note to clients.”Indeed, economic growth is likely to disappoint ECB projections,” they added. “The ECB will probably balance these forces by tightening policy modestly.”ECB Vice President Luis de Guindos acknowledged the deterioration, saying on Thursday that the economy would barely grow in the first half of 2022. “My impression is that growth in the first quarter of this year … will be slightly positive, we’ll have very low growth,” de Guindos said. “In the second quarter of the year, my impression is that growth will be hovering (around) zero.” RATE HIKES … OR NOTMarkets are pricing in a combined 60 basis points of hikes this year in the ECB’s deposit rate, now minus 0.50%, which would end a nearly decade long experiment with negative rates.But market analysts are more cautious and even the most conservative policymakers are not calling for rates to move into positive territory quickly, indicating a disconnect between market pricing and the ECB’s own signals. ECB Chief Economist Philip Lane, among the doves on the rate-setting Governing Council, even cautioned on Thursday that the war could force the ECB to ease, rather than tighten policy.”We should also be fully prepared to appropriately revise our monetary policy settings if the energy price shock and the Russia-Ukraine war were to result in a significant deterioration in macroeconomic prospects,” Lane said in a speech, calling for readiness to either ease or tighten policy. The caution is especially warranted as Germany, the biggest of the 19 euro zone economies, may already be skirting a recession and has started drawing up plans for rationing natural gas in case supplies from Russia are disrupted.Others added that even if high inflation hurts the consumer and weighs on growth, it is increasingly difficult for the ECB to play it down, so talk of rates hikes are bound to intensify.”Even though high inflation is a drag on growth, the ECB likely has some pain threshold on the inflation data as well,” JPMorgan (NYSE:JPM)’s Greg Fuzesi said. “The bigger the upside surprises on inflation, the smaller the bar for any improving news from Ukraine to intensify a debate on the interest rate outlook.” More