Economy

The war in Ukraine has already upended countless lives. Now, it’s upending business models as well. With the exodus of western multinationals from Russia and Ukrainian supply chain disruptions coupled with Covid-related disruptions in China, companies are having to rethink everything. The challenges range from how they pay local Ukrainian staff (in some cases with cash delivered to Poland) to how to get hold of parts they sourced from the region before the war (the answer so far: slowly and spottily). Among those hard hit have been German carmakers that depend on components from Ukraine. Their plants are idle as they struggle to figure out a new system.But even companies that don’t have suppliers or operations in the thick of the conflict recognise they need to move from assumptions of unfettered globalisation to more regional — or even local — hubs of production and consumption. They also see the benefits of more decentralisation and system redundancy (namely having extra resources to provide back-up support) to avoid future shocks. “The ongoing supply chain disruptions have now lasted longer than the 1973-4 and 1979 oil embargoes — combined!” says Richard Bernstein, CEO of RBA, the investment firm. This isn’t a blip, but rather the new normal.Large companies that can afford to own more of their entire supply chain have been moving towards vertical integration as a way to smooth disruptions and the inflationary pressures that result. Companies of all sizes are looking for ways to localise more production wherever their consumers are, no matter which country or region they are in. Many smaller “maker” firms in New York have benefited during the pandemic since they source locally, but the technique is also being picked up by big name brands that simply want more buffers against shocks of any kind — be they geopolitical or climate-related.“Supply chains are under-pressure and have been for some time,” says Arama Kukutai, chief executive of a vertical farming start-up called Plenty, which is working with Walmart to grow vertically-stacked fresh produce on location in California, and also with companies such as Driscoll, the world’s largest berry producer. The two have launched a new vertical strawberry farm on the east coast, with an eye to avoiding transport costs and delays. “Companies like this want to lessen their reliance on long, complex supply chains and imports,” Kukutai adds. “Basically, you want to build where customers are.”This has been a trend in manufacturing for some time — particularly for private companies that are more often family-owned, more rooted in local communities and have less pressure on quarterly results. One of those is New Balance, a footwear company that last week announced a factory in Massachusetts to service growing demand for “made in America” products, with more local suppliers to bypass shocks where possible. “Being private makes it easier to do more locally,” says CEO Joe Preston, “but I think that coming ESG requirements are going to push more companies in this direction, because labour issues are a big part of that.”Certainly, it is becoming clear that the world isn’t resetting to globalisation as it did in the 1990s. Some industries, such as technology, will feel the pressure to change existing business models more than others. Witness Intel creating a major new chip foundry in Ohio as part of America’s larger tech decoupling from China, and now Russia, via chip export sanctions. The company is also investing in European regional foundry capacity.I wouldn’t be surprised if the war in Ukraine quickens restrictions on “dual-use” technologies that can be deployed for either commercial or military purposes. A recent report by TS Lombard cited industries ranging from chips, telecommunications and IT equipment, to aerospace, avionics, computers, electronics, sensors, lasers and their components, that may need to shift their supply chains and customer base to account for decoupling. “Think of cloud-connected smart vehicles uploading real-time data to satellites (eg Tesla/SpaceX) as surveillance devices that can be repurposed for warfare,” notes the report.This shift could certainly have a big financial market impact, since much of the growth of the largest tech firms has been predicated on their ability to cross borders seamlessly. But that impact won’t go just one way. Witness the rise of 3D-printing stocks, for example, which have soared amid the pandemic. The industry was able to plug the gap in supply chains by locally manufacturing everything from PPE to medical and testing devices, to personal accessories, visualisation aids and even emergency dwellings.The entire 3D-printing market grew 21 per cent from 2019 to 2020, and is predicted to double by 2026. There are now a number of companies, such as Austin-based Icon, that are moving from printing disaster shelters to luxury homes. Given the complexity and carbon intensity of home building, with its multiple supply chains, it’s a shift that could help curb inflation. As a 2020 article in Nature put it, “3D printing of buildings requires shorter building times and lower labour costs, and can use more environmentally friendly raw materials.” The resulting homes can be “easily transported and deployed to areas where they are most needed”.Even in times of war, decoupling and geopolitical fear, it’s worth remembering that there is opportunity in [email protected] More

At the start of 2022, bond investors were already facing the highest inflation rates in decades across most large western economies. Now, following Russia’s invasion of Ukraine last month, which drove commodity prices to their highest level since 2008, inflation well in excess of central bank targets is expected to stick around for even longer.For central bankers, this economic fallout from the Ukraine war has sharpened a dilemma: how to tackle rising prices without choking off economic recovery from the coronavirus pandemic?“There’s been a stagflation concern around for a while and, with everything that’s happening in Ukraine, that’s really starting to accelerate,” says Gregory Peters, co-chief investment officer at PGIM Fixed Income, the asset manager.The US Federal Reserve and the European Central Bank have, so far, appeared to stick to their guns, emphasising the fight against inflation rather than the threat to growth posed by the “oil shock” of the Ukraine invasion.The Fed last week delivered its first post-Covid interest rate rise by a quarter of a percentage point, to a target range of 0.25 per cent to 0.5 per cent, and signalled it expects a further six increases this year. The Bank of England raised its base rate to 0.75 per cent at its third meeting in succession on Thursday. And even the typically more dovish ECB accelerated the winding down of its asset purchase programme this month, leaving markets braced for higher rates in the eurozone later in the year.To some investors, that is a sign that central bankers will not come riding to the rescue at the first sign of economic trouble or a setback in stock markets — as they often did in the period after the 2008-9 global financial crisis.

The Marriner S. Eccles Federal Reserve Board building in Washington, DC © Saul Loeb/AFP/Getty

“People have been preconditioned by central banks to ‘buy the dips’ over the past decade,” says Peters. “But with inflation that is still high and has become politicised, I’m not sure you can blithely use the same playbook.”US short-term bond yields, which are highly sensitive to interest rate expectations, have charged higher in recent months, with the outbreak of conflict in Ukraine only briefly arresting their rise. The two-year Treasury yield has risen to 1.92 per cent from less than 0.8 per cent at the start of the year.In Europe, with its greater reliance on Russian energy imports, short-term borrowing costs sank at the start of the conflict but have since rebounded to levels seen in mid-February. Many fund managers believe that the economic fallout from the war will prompt the likes of the ECB and the BoE to move more slowly on rates later in the year.“The nature of inflation has changed,” says Christian Kopf, head of fixed income at Union Investment, the German asset manager.“Before this oil shock, we had a mixture of supply- and demand-driven inflation. Now, it’s clearly mainly supply-driven, and that warrants a different central bank reaction,” he argues.“We have a big shock to activity in the euro area and it doesn’t make sense to hike at the moment.”

In fact, further rises in oil prices, despite their short-term inflationary impact, could actually help to dampen longer-term inflation expectations by sapping the strength of the economy, according to Simon Lue-Fong, head of fixed income at Vontobel Asset Management.The price of a barrel of Brent crude has surged close to $130 from less than $80 at the start of the year. Last Thursday, it traded at just under $105. “The longer the oil price stays high, the more damage it will do to growth or inflation expectations,” Lue-Fong says.Even before the outbreak of the Ukraine conflict, bond investors were questioning how far central bankers would be able to tighten policy without snuffing out the recovery. Longer-term bond yields have also risen in recent months, but their ascent has been much more modest than that seen in, for example, two-year debt. The US 10-year yield trades at 2.15 per cent, up from a little over 1.5 per cent at the end of 2021.This so-called flattening of the yield curve — where the gap between short-term and long-term yields shrinks — is even more pronounced in the UK and is often seen as a market signal that growth is set to slow.Many investors think an inversion of the yield curve — where long-dated bond yields fall below short-term interest rates — is possible later in the year if central banks go ahead with a series of rate rises. An inverted curve can indicate that investors expect the central bank will be forced to cut rates due to an impending downturn and has, for decades, been a reliable predictor of recession.“What the market has been telling you quite clearly over the past six months is that we are careering towards a policy mistake, and that looks even more likely now,” says Peters. “I’m not trying to say central bankers are stupid — it’s just incredibly difficult to get this right.” More

The writer is co-founder and chief investment officer of Guggenheim PartnersThe recent surge of inflation has led the media and market pundits to look to economic history for relevant comparisons. America has suffered through bouts of inflation before, but many “experts” only consider the precedent from their lifetime — that is the inflation of the late 1970s and early 1980s that was conquered by the draconian interest rate policy measures of the Paul Volcker-led Federal Reserve. While that period’s inflationary rise may invite comparisons to today, its root causes — funding the Vietnam war and the Great Society social policy initiatives of Lyndon B Johnson, delinking the dollar from gold, and an energy crisis — were a different set of circumstances. A more appropriate corollary from history is 1946-48, the post-second world war inflationary episode resulting from supply shortages during peacetime refits of manufacturing plants, rebounding demand for consumer goods, high levels of savings and soaring money growth.This sounds a lot like today. As for how the 1940s inflation ended, supply and demand ultimately came back into balance, and a more primitive version of the Federal Reserve — which did not have the targeting of a benchmark fed funds rate in its toolkit — slowed the economy by curbing money and credit growth and shrinking its balance sheet.Price increases slowed in 1948 and actually declined in 1949, and a brief, mild recession ensued. Equity prices generally remained stable. This would be a welcome outcome today, but the execution of monetary policy over the coming months will determine whether inflation ends gently or with a serious recession and more market turbulence.The pent-up demand of postwar America was extraordinary: Between 1945 and 1949 — a period when the US population was approximately 140m — Americans purchased 20m refrigerators, 21.4m cars, and 5.5m stoves. This was quite a rebound from the shortages of wartime America.At the same time, excess savings generated during the war and the increased postwar credit demands of borrowers in 1946 and 1947 — by farms, homeowners, real estate investors, and industry — further stoked inflationary pressures.CPI inflation, which was 3.1 per cent in June 1946, peaked nine months later at 20.1 per cent in March 1947. The spike in inflation followed a period of explosive growth in the monetary base and in securities held on the balance sheet of the Federal Reserve, which grew 300 per cent to $24.5bn in 1945 from $6.2bn in 1942. This wartime rise was not unlike what we have seen recently in the central bank balance sheet in response to the pandemic.How did the inflationary period end after the March 1947 peak? First, pent-up demand subsided and supply came on board as prices rose and manufacturing transitioned from wartime to peacetime activity. In other words, the market’s “invisible hand” worked.Second, monetary policy tightened, but using a few different elements than what we see today. As explained in the 1948 Fed Annual Report: “Federal Reserve policies during most of 1948 . . . were directed toward exerting restraint on inflationary credit expansion while at the same time maintaining stability in the market for government securities.” Notably missing is any talk of interest rate management.With the Fed likely to embark on a path of reducing its balance sheet while simultaneously raising rates, the risk is much greater that the result will not be a quick, mild recession like we saw in 1949, but a much more serious downturn, greater market volatility and a potential financial crisis. No one can control both the supply and price of any commodity, including credit. Given the record corporate debt levels, the rich valuation of financial assets and surging prices for speculative investments, the prospects for policy error are high.Policymakers would be wise to look to the past. Attempts to contain inflation in the 1970s were focused on targeting short-term rates instead of limiting credit creation by controlling the Fed balance sheet and the money supply. This policy was an obvious failure. After the financial crisis, policymakers seem to have lost faith in the power of markets to set prices and balance supply and demand, and have gained too much faith in their own ability to do the same. Perhaps a rational and disciplined approach adhering to monetary orthodoxy as demonstrated in the 1940s would greatly reduce the risk of policy error, avoid the inflation spiral of the 1970s, and reduce the risk of yet another financial panic.  More

The town of Glasgow, Montana, which promotes itself on T-shirts with the words “Middle of Nowhere”, might seem a strange place to highlight in a book about the global expansion of Chinese tech. But it was here that Jonathan Hillman grasped how Chinese communications technology companies were sweeping the world.Struggling to afford western telecoms kit, Glasgow made do with inadequate links until Huawei came to its aid in 2010. Undercutting competitors by up to 30 per cent, the Chinese communications equipment group won a contract from Nemont, the local telecoms operator, for a modern 3G system. Nemont was aware of the political complications of installing gear from communist China. But when it wrote to the US government raising its concerns, it received no reply. So it went ahead, and had Huawei install its system, to the satisfaction of local residents.As Hillman writes, Huawei won the business because it was cheap and effective, and because the US authorities — and US industry — had paid too little attention to security issues and neglected the digital needs of the country’s vast rural districts.Everything changed with the dramatic shift in policy triggered by President Donald Trump. After years of betting that economic collaboration would lure Beijing on to the path of democracy and co-operation, Washington decided that this approach had failed in the face of an increasingly authoritarian China under Xi Jinping. Longstanding concerns about the security risks involved in opening US markets to Chinese tech companies have become paramount. Instead of promoting deals and joint ventures, American policy now focuses on reducing China’s presence. Huawei and others have been banned. Nemont faces the costly job of replacing its existing equipment.In The Digital Silk Road, Hillman, who won the FT’s Bracken Bower Prize in 2019, sets out how China has come from nowhere in digital technology in the past 30 years to pose a strategic threat to the US and its allies. A security specialist at the Washington-based Center for Strategic and International Studies, he catalogues America’s failure to take the risks seriously or to curtail the flow of knowhow that Chinese companies sucked out of the US, via everything from flawed technology transfers to theft.

Hillman looks at digital networks, electronic surveillance, data storage, international links and satellite communications. He charts how key Chinese companies compete with each other and simultaneously benefit from state support, including from the military. Drawing on Chinese sources as well as western, he shows how Chinese leaders from the 1990s backed digital technology, recognising its core military and security applications as well as its commercial role. From the outset, they grasped how it could control a population. Where Ronald Reagan once saw the communications revolution as “the greatest force for the advancement of human freedom the world has ever seen”, Beijing took a different view.As Jiang Zemin, one of Xi’s predecessors, told Communist party officials as early as 2000: “The basic policy concerning information networks is to actively develop them, strengthen our supervision over them, seek their advantages, avoiding their disadvantages, use them for our own purposes, and strive for a position where we always hold the initiative in the global development of information networks.” Hillman rails at the lost opportunities. But he is also, rightly, admiring of the determination of Chinese companies and of their staff. And he bemoans the divides in the US, where in 2019 a quarter of the rural population still lacked basic broadband. Perhaps the sharpest chapter is on surveillance, where Chinese companies provide the state with the technology of repression — notably for use in Xinjiang — while selling it abroad to maximise revenues. Hillman says: “If the market for surveillance equipment were a gun show, Chinese firms would be the dealers who do not ask for background checks.”It is a shame that Hillman’s fine prose and telling case studies are not supported by charts, maps or pictures. While everything costs money, his publishers could have done better, perhaps using some of that ubiquitous Chinese digital technology.Hillman falters somewhat when he sets out his remedies. Faced with authoritarianism “on the march”, he calls for a US-led alliance of democracies to counter China and take non-Chinese digital technology to the world. This was important before Vladimir Putin’s invasion of Ukraine. And it is even more important now. But there is little on the economic policies that could support such a geopolitical tech drive. Curiously so, as earlier chapters have plenty on the commercial elements of Chinese tech’s rise and the west’s naive response.This book might not satisfy those who read first and last chapters and skim the bits in between. Instead, take the time to dive deep into this well-written account of the biggest technological transformation of the 21st century.The Digital Silk Road, China’s Quest to Wire the World and Win the Future, Jonathan Hillman, Profile Books, £20, pp351 More

Earlier this month, the ECB accelerated its exit from unconventional stimulus, and investors have been ramping up their bets on higher ECB rates.De Guindos told Handelsblatt in an interview published on Sunday that second-round effects and de-anchoring of price expectations would be “deciding factors” for the central bank.”If we see those, then we will act,” he said.Asked about risks to the European financial system due to the war in Ukraine, de Guindos said there were no liquidity bottlenecks, companies were issuing bonds, and that stocks were volatile but without “dramatic developments”.He noted the triggering of margin calls for commodities derivatives that have resulted in increased collateral to cover open positions.”But according to our observations, those facing these margin calls have so far been able to meet them,” he said. More

Hello and welcome to the working week. First the bad news. I’m afraid that this week’s diary is filled with more grim landmarks. Having just passed the second anniversary of Covid-19 being declared a global pandemic at the beginning of March, this Thursday will mark a month since Russian troops invaded Ukraine. Nato heads of state — including US president Joe Biden — will gather that day for an extraordinary meeting to discuss next steps in relation to the conflict. It will coincide with a pre-planned European Council meeting of EU member state leaders to discuss the energy crisis and Covid as well as the Ukrainian war.The UK is facing the sharpest drop in living standards since the 1950s — and possibly two lost decades for the economy. Chancellor Rishi Sunak has the unenviable task on Wednesday of charting a way through this when he presents his Spring Statement to the Westminster parliament. Will he introduce a windfall tax on energy companies? With better than expected public finances, the UK’s treasurer in chief has some wriggle room to offset the financial pain heading towards British households, but it will still be a challenging balancing act to ease the rising cost of living for many. In the last 20 years, a string of economic shocks — from the financial crisis to the pandemic — have exposed structural weaknesses in the UK economy so MBA-graduate Sunak needs fresh ideas to transform the country, and fast.The lights will be going out in cities across the planet on Saturday, but not because of the energy crisis — we hope. It is Earth Hour, the annual show of international kinship on climate change, reminding us that we can do more to tackle global warming by using less power.So what about the good news this week? The US National Park Service has estimated cherry blossoms will reach peak bloom in Washington in the coming days. The Oscars are also back in person with an awards ceremony in Hollywood on Sunday. And also on that day, in the UK and the EU, the clocks go forward by an hour for daylight saving time, ushering in longer evenings for those of us in the northern hemisphere to get out in the open. It could be just what we need to lift the spirits in these dark times. Economic dataThe spending statement will coincide with economic data on the state of the UK economy — inflation, house prices and the Office for Budget Responsibility’s medium term outlook for the economy. Forecasts into the distant future — that is, more than a couple of years — could be taken with a large dose of salt, but observers will be keen to see what current shocks have done to growth forecasts overall.If you are after international comparisons, there is the publication of numerous purchasing managers’ index (PMI) reports on Thursday. If you want yet more UK data, on Friday we will get an update on consumer confidence and retail sales. CompaniesExpect some strong numbers from the British retailers that are reporting earnings this week. Home improvement chain operator Kingfisher — which reports full-year earnings on Tuesday — raised its guidance in December, highlighting that concerns about an end to DIY with the lifting of lockdown restrictions had not come to pass. It was also a good Christmas season for clothing chain Next, which reports its numbers on Thursday, having also raised its guidance in December. The question is whether the sales boom can last given the hit to consumer confidence from rising fuel costs and the war in Ukraine.It will be a nervous week for British restaurateurs, however. The industry is in a parlous state — insolvencies rose 20 per cent during the last quarter of 2021, according to accountancy firm UHY Hacker Young. If that was not enough to contend with, the UK government’s ban on commercial evictions ends on Friday, the same day that the Commercial Rent (Coronavirus) Bill comes into force. While rent arrears from the protected period — which for England means 20 March 2020 to 21 June 2021 — landlords will no longer be barred from taking action on unpaid rent on other occasions. It means that restaurants could be forced to pay rent for the periods in which they were unable to open, putting many into a precarious position. Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayGermany, February producer price index (PPI) figures for industrial productsUK, Rightmove monthly house price dataResults: Nike Q3, Salzgitter FYTuesdayCanada, monthly industrial product and raw materials price indicesUK, CBI monthly industrial trends survey plus public sector net borrowing dataResults: Adobe Q1, Iliad FY, Kingfisher FYWednesdayArgentina, Q4 GDP figuresEU, flash monthly consumer confidence dataSouth Africa, February consumer price index (CPI) dataUK, Spring Statement by chancellor Rishi Sunak, plus February PPI and CPI data, Office for National Statistics house price index and the Office for Budget Responsibility’s economic and fiscal outlookResults: General Mills Q3ThursdayEurozone, France, Germany, Japan, UK, US: IHS Markit composite purchasing managers’ index (PMI) dataEU, European Central Bank’s general council meets in FrankfurtJapan, minutes published of Bank of Japan’s monthly monetary policy meetingSouth Africa, South African Reserve Bank’s monetary policy committee meetingUK, CBI monthly distributive trades survey showing retail industry trendsResults: Next FYFridayGermany, Ifo Institute monthly business confidence indexUK, Gfk consumer confidence figures plus ONS February retail sales dataUS, February pending home salesGovernor of the Bank of England, Andrew Bailey, speaks at an online forum hosted by the CBIResults: Smiths Group FYWorld eventsFinally, here is a rundown of other events and milestones this week. MondayEU, foreign affairs council meets in Brussels with discussions including the Ukrainian crisisUK, a service of thanksgiving for British wartime singer Vera Lynn to be held at London’s Westminster AbbeyTuesdayJordan, gubernatorial and municipal electionsWorld Water Day, organised by the UN Environment Programme to raise awareness of water access and managementWednesdayUK, WikiLeaks founder Julian Assange to marry his fiancé, the lawyer Stella Moris, in Belmarsh prisonUS, Saturday Night Live’s Pete Davidson becomes the latest celebrity to take a ride to the edge of space on Blue Origin’s New ShepardThursdayBelgium, final Covid-19 restrictions lifted plus Brussels hosts summit of EU leaders and an extraordinary meeting of Nato heads of stateUkraine, one calendar month since Russia launched its attackUS, Covid death toll set to pass 1mn mark, according to a Reuters tallyFridayFeast of the Annunciation in the Roman Catholic ChurchGreek National Day, celebrating the country’s 1921 declaration of independenceUK, ban on commercial evictions — introduced during the pandemic — endsSaturdayFrance, Eiffel Tower to switch off its lights as part of Earth Hour, calling for increased action to protect the planet from climate changeGermany, elections in western state of SaarlandMalta, general electionUnited Arab Emirates, the world’s richest day in horseracing, the Dubai World Cup, will be run at the Meydan RacecourseSundayDaylight Saving Time begins in the EU and the UKChina, indirect election of Hong Kong’s chief executive by a 1,500-member Election Committee, criticised for being weighted towards pro-Beijing interestsUK, Mothering SundayUS, the 94th Academy Awards (the Oscars) ceremony returns to the Dolby Theater in Hollywood, Los Angeles More

Three quarters of a century ago, when the cold war with the Soviet Union began, US president Harry Truman put forward what became known as the Truman Doctrine. The goal of US foreign policy, it said, was to “support free peoples who are resisting attempted subjugation by armed minorities or by outside pressures”. This mission defined America’s stance in the world for the next four decades. No one would have wished for a new cold war, but a similar pivot point has been reached today. In his State of the Union address last month, President Joe Biden warned that the world was in the midst of a battle between “democracies and autocracies” in which “freedom will always triumph over tyranny”. It is not yet clear that it actually will. However, the US could do much to impact the direction of the world for the next several decades if the White House is able to use this moment to articulate a new and more coherent foreign policy. In this, Biden has the wind at his back. He was clearly right to move away from Donald Trump’s position that Nato was no longer important. Russia’s aggression is a reminder of how crucial Nato is, and how powerful the US and Europe can be when aligned not only militarily but economically. Germany’s new willingness to increase its own defence spending to 2 per cent of economic output will not only strengthen Nato but be a boost to Biden, since the US has long lobbied for more European countries to pour more money into the alliance.The unity with which Europe and the US have approached financial sanctions on Russia has also underscored the power of the dollar-based financial system. In the 21st century, economic power — particularly in the form of financial, trade, and energy networks — is just as important as military power. Biden should capitalise on this by pounding home the need to work with Europe and other allies more closely on a shared technology and trade framework for the future. In the face of China’s rise, too, this framework should protect the values of liberal democracies, and ensure open markets do not become a winner-take-all game. That might include working with the EU on a joint energy strategy to ensure Europe can pivot away from Russian oil and gas in a safe and sustainable way. It might mean shared industrial strategies and standards in high-growth areas such as clean technology. It should certainly include a common approach to tech regulation, ensuring both privacy and fair market access.The White House also needs to be honest about the inflationary effects of the geopolitical moment. The past 40 years of globalisation lowered prices. A more splintered world will raise them, at least in the short term. But a poll of US consumers conducted at the beginning of March found that 71 per cent said they would be ready to pay more for fuel if they knew it would benefit Ukrainians. This sense of solidarity has been sorely missed in US foreign policy as well as in domestic politics. Americans are paying attention to what is happening in Europe in a way that they have not done for decades. They are also longing for a renewed sense of non-partisan leadership, and of America’s place in the world. This is an ideal time for Biden to articulate not only the strength of US military and economic networks, but the strength of western values — the rule of law, democracy, respect for the individual, property rights, pluralism and open markets. As the war in Ukraine has shown us, these are worth fighting for today, just as they were in Truman’s time. More

The bank started buying crowns in the market on March 4 to halt a drop in the currency caused by investor flight after Russia’s attack on Ukraine. It does not have any target rate nor volumes, and said its action was aimed at unjustified currency weakening. The currency has regained nearly all losses versus the euro since the start of the Russian invasion on February 24.Rusnok, however, said on Sunday the bank may discuss further using its large reserves accumulated in 2013-2017 — when the bank intervened to weaken the currency — to help bring inflation under control.”Now we have to talk further about further steps, whether we perhaps want to temporarily strengthen the crown not only for the reason of stability, but perhaps also to actively use the exchange rate as an anti-inflationary tool,” he said.”But it is necessary to lead a debate on that and it is quite a complicated issue. But I cannot exclude it for myself.” Rusnok also said inflation shocks together with the war in Ukraine may bring Czech economic growth to zero by the end of the year and a European recession cannot be excluded.The central bank has been faster than most others in hiking interest rates since last year, taking the main repo rate to 4.5% and signalling further increase.It held 157.46 billion euros in foreign exchange reserves as of the end of February, equal to about two thirds of the country’s gross domestic product. More