The U.S economy finished 2021 on a strong note with GDP growing faster in the fourth quarter than expected. That should provide confidence that it will carry over into 2022, so far the year is beginning with some foreboding signs.

On Thursday, the Commerce Department reported that growth in gross domestic product (GDP) in the fourth quarter of 2021 reached 7.0%. This figure was generally in line with the forecasts put forward by economists, reflecting the strong consumer spending by Americans despite supply chain bottlenecks and the Omicron variant of COVID-19.

However, the odds do not appear to be completely favorable that this success will continue into the first quarter of 2022 with rising uncertainty from a war in Europe and the Federal Reserve's new monetary policies -- not to mention the threat posed by ever-rising inflation.

Americans are clear that they feel the weight of inflation acutely as it cuts into their optimism about the state of the economy. In the most recent reading, core inflation was measured at 7.5%, the highest it has been in nearly four decades. Other measures, including inflation for wholesale goods, are similarly negative, suggesting that supply chain issues are enduring and show few signs of abating soon.

This inflation in turn is spurring the Fed to take on a more hawkish stance to address it. In March, the central bank is expected to hike interest rates by anywhere from a quarter to half a percent for the first time in years. Last month, economists anticipated that three likely rate hikes in 2022, a year ahead of when the Fed initially expected to begin raising rates.

Further afield, geopolitical risks related to the standoff between Russia and Ukraine have fueled fears about how the conflict and resulting sanctions will affect everyday prices for American households. Early on Thursday morning, Russia launched a nationwide assault on military sites across Ukraine after President Vladimir Putin announced a “special military operation” to “demilitarize” his Western-leaning neighbor.

President Joe Biden and his European counterparts are expected to announcea broader sanctions package later on Thursday, but the Biden administration has warned that Americans may experience rising gas costs. After the Russian invasion was announced, oil prices jumped over $100 a barrel, giving weight to analysts’ previous predictions that war would drive up prices worldwide.

While an overall small trading partner, Ukraine is an important source of agricultural products and a supplier of other goods such as fertilizer. This may not figure significantly into U.S inflation as most core metrics discount food prices, but it can worsen supply shortages already experienced.

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