Economic red flags and inflation to beware in 2022
From a new omicron Covid strain to uncontrolled inflation, the global economy faces various challenges and risks in the new year.
After the madness of the past two years, the agreement among economic authorities is that 2022 will be a little bit calmer.
In late 2019, when the first reports of a coronavirus appeared from Wuhan in China, few suspected that a pandemic would affect the world economy after some months. So what can be the significant risks for the forthcoming year?
It is too early to tell how severe the Omicron strain of the virus will be, but it has already given people hopes that life would return to normal.
An economist at BCA Research, Dhaval Joshi, says that even more strains will emerge in the future. He added that one of them will make more trouble. He explained that the danger comes from three things. It is about how contagious it is, avoiding vaccines, and natural immunity. “The big problem is that one of the new variants will turn out to be the most dangerous.
Inflation takes off
The unpredictable pick-up in cost forces has been one of the significant issues of 2021. The US Federal Reserve, the Bank of England, and the European Central Bank were unawares by substantial growth in inflation. Inflation resulted from a combination of increasing energy prices, labor shortages, and supply-side blockages. The Bank of England anticipates the annual expansion in the cost of living to be above 6% by next May, but it will start to drop.
At the same time, central banks will encounter some tough decisions if inflation confirms more ingrained than they expected. Saxo bank came up with its several outrageous predictions just before Christmas. One of them was a wage-price circle in the US, sending inflation above 15%. Even a more modest uprise would cause the Fed to pull policy aggressively.
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