According to Pimco, the impact of the conflict on supply of key goods could lead to a global economy that is too hot and too cold.

Russia's war on Ukraine has disrupted supply chains and trade flows, according to its strategists.

The Pimco team said in a note this week that the global economy and policymakers are confronted with a supply shock that is negative for growth and will push up inflation further.

Concerns about supply have driven prices of commodities and energy to soar, and intensified an already uncertain economic and financial market outlook.

Inflation was running at historic highs even before the Russia-Ukraine conflict. The US Consumer Price Index, a closely watched measure of inflation, surged to 7.9% in February, a 40-year high.

Stagflation is a combination of stagnant growth and high inflation in the same period, according to Pimco.

These are higher food and energy prices, disrupted supply chains and trade flow, less spending and less funding in the economy, and lower consumer and business confidence.

The team at our forum said that in combination, these could result in an economy that will be too hot in terms of inflation and too cold in terms of growth.

While Pimco has revised its forecasts lower, it still expects inflation to peak in coming months, according to the strategists.

Pimco predicts 3% growth for the year, with a return to normal and people spending savings after the Pandemic.

There are obvious and significant downside risks to this growth baseline and upside risks to the inflation outlook, especially if the war or the sanctions escalate further.

According to Pimco, the Ukraine crisis has led to more disruptions as some of the bottlenecks related to COVID-19 restrictions have started to ease.