 The drag on consumer demand from rising prices and energy bills is causing public outcry across much of the developed world. Naturally the policy response from governments has been to offer large fiscal packages to sooth the effects of soaring inflation. In the short term, subsidies and price caps will undoubtedly help cash strapped households and businesses navigate a gruelling winter.
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Much of the talk in financial markets over the past year or so has been focused on inflation and rising interest rates. As prices rise, central banks raise interest rates to squeeze consumer demand and bring down inflation. But so far it hasn’t worked. In the US, core inflation which strips out food and energy prices, unexpectedly rose in August reflecting robust consumer demand.
 Vladimir Putin’s recent demand that Western sanctions be lifted before gas supplies to Europe resume is a sign that sanctions are beginning to hurt the Russian economy. Many have wondered, given the Rouble’s strong recovery shortly after sanctions were introduced, whether widespread embargo's on the Russian economy would have any sustained impact long term.
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