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The economic consequences of war with Iran - Financial Times

What are the more narrowly economic lessons from this shock? 

The first is that we need to reduce our vulnerability to shocks in the availability of fossil fuels. For the US, the net effect of big rises in fossil fuel prices on aggregate real incomes is modestly positive because it is a net exporter, though the distributional effects are malign. But the opposite is true for almost all other industrial countries. Their need to invest in renewables, in order to reduce vulnerability, is clear. 

The second is the need for central banks to ensure that inflation expectations do not get unanchored. Unfortunately, the price spike after Covid makes this more likely. Central banks must be prepared to act against second-round effects of big price rises.

 The economic consequences of war with Iran

 

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