U.S. Outlook to 2026

War’s Impact on the U.S. Minimal … but So Much Could Go Wrong

Updated: April 29, 2022  

Large building with american flag; Road view with lots of buildings Large building with american flag; Road view with lots of buildings Large building with american flag

Russia’s invasion of Ukraine is taking a huge human toll. It has been deeply disturbing to watch unfold. There are many different scenarios for how the war will go over the next few months—some worse than others. Our baseline view is that the Russian army will not extend its war beyond Ukraine’s border and that disruptions to the world supply of natural gas and oil will be limited and temporary.

The war has only added to inflationary pressures. Prior to the war, world oil prices were well above US$80 per barrel. But soon after the Russian invasion, they surged due to the severe economic sanctions imposed by the West on Russia.

If sustained, oil prices above $100 could add as much as a half a percentage point to year-over-year consumer price inflation and cost American drivers more in gasoline bills this year.

  • Aggregate Demand
  • Financial Markets
  • Fiscal Policy
  • Labour Markets

Key findings


The impact on the U.S. economy of the war in Ukraine should be minimal if the conflict remains contained within Ukraine’s borders. We expect real GDP to expand by 3.6 per cent this year.


To contain inflation, the U.S. Federal Reserve will increase interest rates four times this year. If inflationary pressures persist, we could see even more rate increases.


Higher oil prices might not automatically lead to ramped-up oil production, given the ongoing volatility in oil prices as result of this war for which the outcome is impossible to predict.


Fiscal deficits will remain high over the near term, as President Joe Biden hopes to spend more on social programs.

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