Economic Headwinds Mount as Leaders Weigh Costs of Confronting Russia

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The interruption of wheat exports from Ukraine and Russia, which together account for 28 percent of global exports, along with supply chain disruptions, a severe drought in India that has caused it to ban shipments of grain and Covid-related lockdowns in China, are also causing food prices to spiral and increasing global hunger, particularly in Africa and the Middle East.

The question for both American and European policymakers is how to corral leaping prices without sending their economies into recession. The Federal Reserve has begun raising interest rates to tame inflation in the United States, and its chair, Jerome H. Powell, has acknowledged that bringing prices down without seriously hurting the overall economy will be a challenge. Ms. Yellen suggested on Wednesday that the United States was well placed to withstand the turbulence, pointing to America’s strong labor market and healthy household finances. She predicted that the United States would not fall into a recession but that Europe could be a different matter.

“I think Europe is perhaps a bit more a bit more vulnerable, and of course, more exposed on the energy front than the United States,” she said.

That conundrum accounts for the reluctance of the European Central Bank to raise rates. In the plus column, the European Commission noted that unemployment in the eurozone was down, as were government deficits, even though war-related costs were rising.

While food prices are increasing around the world, the level of inflation varies widely. Food inflation was 2.5 percent in France and Ireland during the first three months of 2022 and 10 percent in Eastern European countries, while in Turkey and Argentina, it was 60 to 70 percent in March alone, according to an analysis last week from ING.

In a speech to the Brussels Economic Forum on Tuesday, Ms. Yellen made the case that Russia’s actions are a reminder that nations should not trade national security for cheap energy. She argued that it is crucial to reduce reliance on Russia and China and to accelerate investments in renewable resources.

“No country controls the wind and the sun,” Ms. Yellen said. “Let’s make sure that this is the last time that the global economy is held hostage to the hostile actions of those who produce fossil fuels.”

Alan Rappeport reported from Brussels and Bonn, Germany, and Patricia Cohen from London.