Russia-Ukraine war raises financial stability risks: European Central Bank

The war between Russia and Ukraine has raised financial stability risks, the European Central Bank (ECB) warned on Wednesday.

As financial stability conditions deteriorate, energy and commodity price shocks, amplified by Russia's war on Ukraine, increase risks to post-pandemic growth, inflation, and financial conditions in the euro area and globally, according to the ECB's Financial Stability Review report.

"Since late 2021, rising inflationary pressures have threatened to slow the momentum of the recovery in 2022. Upside risks to euro area inflation and downside risks to growth rose sharply following the outbreak of the Russia-Ukraine war," it said.

"In particular, large rises in commodity and energy prices and ongoing global supply chain pressures are expected to prolong the period of elevated inflation."

ECB Vice-President Luis de Guindos said in a statement that the war "has also increased financial stability risks through its impact on virtually all aspects of economic activity and financing conditions."