Inflation is a monetary phenomenon, but it is much more than that. Price hikes in the US, UK and EU have shattered multi-decade records and burned wage packages. In the best-case scenario, high inflation is a serious policy issue, but it isn’t. In the US this week, consumer price inflation has reached 8.5%. “Core” inflation, which excludes the most volatile items, rose less than expected but still rose 6.6% year-on-year. Factory ex-factory prices rose 11.2% from last year.

Part of that is the pandemic story. In the U.S. in particular, demand has outstripped supply as life resumes after Covid-19 restrictions. Habits have changed, so there is greater demand for goods and less demand for services than before the pandemic. Meanwhile, the pandemic – especially in China – continues to weigh on supply.

In a way, inflation is also a war story. Food and energy prices have soared due to Russia’s invasion of Ukraine.

Markets expect U.S. inflation to be near its peak: With signs of a slowdown in price increases, the pace of rate hikes is now expected to be faster as the Fed unwinds support for the economy and shifts policy toward neutral. President Joe Biden is trying to lower fuel prices by flooding the U.S. strategic stockpile with oil.

The closer you get to the front lines of the conflict in Ukraine, the more complicated life becomes.Eurozone inflation 7.5% March.In the UK, consumer price inflation takes a hit 7% This week, a surge in energy prices rippled across the economy. But central banks in the UK and EU are more likely to find themselves squeezing demand that is already falling.

The scale of their conundrum will depend in particular on steps taken to help Ukraine — especially further sanctions. German economists warn A blanket energy embargo on Russia will hit German growth this year and trigger a recession next year. In their model, inflation remains consistently above 5%. We are in a time of terrible choices.

This makes it worthwhile to go back to first principles. Avoiding defeat in Ukraine must be a key objective, and one the continent should be willing to pay dearly to achieve. Part of the cost could come in the form of higher inflation and slower growth. Quick and effective support should be provided to those most in need who are hurt by the rising cost of living.

These questions are related. In particular, the recent further spike in energy costs is the result of war, and those with modest incomes should not be asked to bear these costs alone.Voters may be willing to take some pain, but politicians can’t risk pushing for new yellow vest —The type of movement that wants to fight for peace at all costs. The cost of living crisis is a factor in French voters’ fondness for far-right Marine Le Pen.

This will have implications for monetary policy. Insulating people from rising prices could spur demand, potentially requiring higher rate hikes than would otherwise be the case. There will also be financial costs. But the Treasury gets help from inflation through taxes and debt levels: they will have to share it. An economic war in Ukraine could mean easier fiscal and tighter monetary policy.

Governments must maintain popular support for Ukraine by protecting families from the worst economic pain. The war is going on in Ukraine, but politicians must also lean towards the domestic front.