(Bloomberg) -- Global finance chiefs committed to keep an eye on financial markets after recent declines and pledged further monetary tightening as they placed the blame for the current inflation shock squarely on Russia. 

The Group of Seven nations “continue to closely monitor markets given recent volatility,” according to a communique released on Friday. Central banks “will continue to appropriately calibrate the pace of monetary policy tightening in a data-dependent and clearly communicated manner, ensuring that inflation expectations remain well anchored, while being mindful to safeguard the recovery.”

“Inflation is a huge danger for economic development,” German Finance Minister Christian Lindner, the host of the meeting, told reporters. “We are committed to limit inflation,” with “very independent” central banks bearing a “very, very big responsibility.”

The gathering of G-7 finance ministers that concluded near Bonn took place against a backdrop of souring market sentiment on the world economy, and continuing anguish at the human tragedy unfolding as Ukraine fights off Russia’s invasion. That predicament was very much on their minds as they contend with the price shock it has produced. 

“Across most G-7 countries, inflation rates have reached levels not seen for decades, as a result of Russia’s war of aggression against Ukraine, which is causing substantial increases in commodity, energy and food prices,” they said. “G-7 central banks are closely monitoring the impact of price pressures on inflation expectations.”

The statement was released after the group’s most comprehensive gathering since the outbreak of the conflict, meeting on a hilltop near Bonn where the World War II allies granted Germany its post-war sovereignty. 

While officials didn’t specify the danger of stagflation in their communique, that combination of surging inflation, stalling growth and rising unemployment featured prominently in discussions, as explained beforehand by Lindner and his US counterpart, Treasury Secretary Janet Yellen. 

Delicate Balance

Central banks and governments are seeking a delicate balance between policies that tame inflation and those that spur activity. Getting it wrong could precipitate a painful coalescence of higher unemployment, slow economic expansion and even more acute inflation, the risk that roiled markets in recent days. 

In the US, the Federal Reserve has already embarked on hiking rates and Chairman Jerome Powell has said he would keep raising until there is “clear and convincing” evidence inflation is in retreat. While moving slower, European Central Bank policy makers are increasingly flagging they will raise soon too.

“We can move gradually, raising interest rates in the coming months,” Bank of Italy Governor Ignazio Visco, one of the G-7 attendees, told Bloomberg Television on Friday. While June is too early, “we will move after that -- after that, means perhaps July.”

Yellen speaking to reporters on Thursday, said it’s “conceivable that there could be a soft landing” but that avoiding a recession would require “both skill and luck.”

What she and her colleagues are also aware of is the fiscal consequence of ongoing support for economies sustained by public finances. That featured in the communique too.  

“The necessary fiscal response also led to higher levels of public debt,” the G-7 said. “We are committed to a stability- and growth-oriented medium-term macroeconomic policy mix, which puts us on a clear path to medium-term sustainability of public finances and a resilient financial sector.”

Other items that featured in the communique include the following: 

  • $19.8 billion of budget support pledged to Ukraine this year -- read full story here
  • G-7 has a “strong political commitment” to change global tax system and advance work on new rules 
  • It is urgent to improve the Common Framework for debt restructuring of developing and emerging countries, ministers say

(Updates with Lindner in third paragraph)

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