Global financial conditions are the worst in years as high energy prices and the Russian-Ukrainian conflict, along with falling inventories and supply chain setbacks, point to a dire future, reported Reuters Monday, March 7.
Financial conditions, as the article says, are a set of measures, including exchange rates, stock fluctuations, and borrowing costs, that affect the money available to spend and invest in the economy. And the conditions are currently tight.
Goldman Sachs, author of one of the most widely used financial conditions indices, has previously shown that a 100 basis point tightening cuts growth by one percentage point in the coming year.
Reuters wrote that Goldman Sachs’ Global Financial Conditions Index (FCI) is at 100.2, 60 points higher than before the start of the conflict in Ukraine. The last time it was at this level was in March 2020 when the pandemic shutdowns began.
And it may not be over yet, according to Rene Albrecht, strategist at DZ Bank.
He said if inflation rose and central banks raised interest rates, financial conditions would tighten further.
“Economic momentum will slow further, inflation will still be high and you will see second-round effects and then you will get a stagflation scenario,” he said. By that, Reuters noted that it meant a combination of rising inflation and slowing economic growth.
Read more: Withdrawal of Visa and Mastercard in Russia Highlights the Importance of Traditional Networks for Crypto
Many companies boycotted Russia because of its invasion of Ukraine. This includes Visa and Mastercard, which were the main means of payment with Bitcoin.
PYMNTS wrote that this makes it harder in Russia to use crypto as anything other than an investment.