The Ukraine war has raised long-term inflation expectations

Abstract

Until recently, central banks such as the ECB and the Swiss National Bank considered the current rise in inflation to be temporary, albeit more persistent than expected. This column uses survey data Switzerland and a quasi-experimental research design to show that companies' long-term inflation expectations have increased significantly following Russia’s invasion of Ukraine, especially in manufacturing. In this sector, higher energy and commodity prices prove particularly important in motivating price increases. These findings add to concerns about de-anchored inflation expectations and, as a result, more persistent inflationary pressures.

Pascal Seiler

PhD candidate and Consultant