President Joe Biden on Thursday seemed to temporarily ease one of the market’s biggest fears about Russia’s invasion of Ukraine, making clear that the U.S. wasn’t looking to sanction the Russian energy sector — the country’s strongest tie to the global economy. Stocks closed in the green, but the anxiety is far from over.
Investors are reacting mainly to concern about what the escalating war could mean for oil against the backdrop of already high inflation. The threat of soaring oil prices could spark further price jumps and, at worst, even tip the U.S. into a recession, as your guest MM host reported.
Essentially, the moves will choke off a lot of funding for the Russian economy, including Wednesday’s move that blocks the Russian government from getting Western financing for its debt. The big question is how much damage this will do, including how much it crimps economic activity by Russian citizens.
“This really puts the government in a position where it has to rely on domestic financing,” said Rachel Ziemba, adjunct senior fellow at the Center for a New American Security. “The banks might be more involved in funding the key government projects, so either they choose even lower levels of growth, or the banks might be less willing to lend to the population because they’re supporting the government.”
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