Adriana Kugler

Central bank mandates are built around domestic conditions. Yet the past decade has pushed global developments and geopolitical risk to the center of the conversation, and that changes how the job gets done.

In a companion piece, I laid out why research on uncertainty and inflation has produced such contradictory results: the studies simply do not separate uncertainty by source. Here I want to walk through what happens once you do, because the results are genuinely striking. I have presented this work in academic settings, including a lecture at the London School of Economics on monetary policy under geopolitical shocks . Take three specific kinds of risk: trade policy uncertainty, geopolitical risk tied to oil, and uncertainty stemming from national security concerns. Analyze these separately instead of folding them into one broad uncertainty variable, and each one carries its own distinct economic signature. Trade policy uncertainty produces the inflationary effect you would expect. Oil-linked geopolitical risk starts out inflationary too, since disruptions to oil supply push energy prices higher, but that effect eventually flips and becomes disinflationary. The third source runs the opp...

Ask ten economists whether uncertainty pushes inflation up or down, and you may get several confident, contradictory answers. The disagreement itself turns out to be the more interesting finding. Ask ten economists whether rising uncertainty pushes inflation higher or lower, and you will likely get several different, well-supported answers. That is the strange state of one of the more pressing questions in macroeconomics today. I have returned to this question repeatedly in my academic work and in venues like my 2025 Whittington Lecture at Georgetown's McCourt School , and the honest answer is that the literature on what drives inflation does not converge on one story. The spread of findings is striking. Some papers find uncertainty pushes inflation down. Others find it pushes inflation up. A few find no measurable effect at all. One rigorous study traces consumer uncertainty through what economists call a real-options channel: uncertain consumers pull back, firms hold off on hirin...

A geopolitical shock in one region can move through energy, fertilizer, and food markets before reaching households on the other side of the world. What I observed at the World Bank made that chain of effects impossible to overlook. Some economic shocks remain close to where they start. Others spread far beyond their point of origin. The Russian invasion of Ukraine clearly fell into the second category, and it became an important part of understanding the inflation that followed. The most immediate cost was human, marked by the loss of innocent lives and the destruction of infrastructure across Ukraine. Yet the economic effects spread well beyond the region, reaching countries far removed from the conflict. I was serving as the U.S. Executive Director at the World Bank during this period, a position that made the global transmission of the shock especially clear in a way that broad statistics alone could not fully convey. Energy, fertilizer, and the chain reaction The first transmissi...