A Surge in Geopolitical Risk Another challenge facing central banks is the surge in geopolitical risk triggered by the Russian invasion of Ukraine. This has induced a further increase in commodity prices. And it has increased inflation worldwide. In addition, uncertainties over geopolitical risk are extremely high. These uncertainties could put downward pressure on the global economy by shrinking trade and damaging confidence.
Thirdly, in response to the shock, governments around the world have signi cantly - and necessarily - increased spending to support their economies. 15 This support has been absolutely necessary to both to support affected households and business and to minimise the long-term damage of the shock to the economy. However, this also brings risk over the medium term with higher public debt levels.