- Despite the coronavirus omicron variant weighing in the near term, growth should remain above potential, with inflation likely to moderate this year amid central banks tightening and improvement in supply chains.
- Developed market central banks further advance tightening policy, with the Federal Reserve paring back quantitative easing and the Bank of England raising rates. Emerging market central banks may be nearing peak tightening, with China already taking steps towards easier policies.
- Yield curves likely to flatten as global short-term rates biased higher with central banks tightening, while long-term rates likely capped by easing inflation concerns and moderating liquidity.
- Key risks to global markets include the omicron variant, persistent inflation, supply chain disruption, central bank missteps, China growth trajectory and increasing geopolitical concerns.
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