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Omicron and inflation: The supply-demand forces that will determine price outcomes

Posted by Neil Shearing | Category : The Chief Economist's Note.

Is Omicron inflationary? It’s one of the questions we’ve been asked most often since the identification of this new, and potentially more virulent, strain. Like much to do with Omicron, a lot remains uncertain and the full implications will not start to become clear until we know more about the threat posed and – crucially … Continue reading “Omicron and inflation: The supply-demand forces that will determine price outcomes”

What would an Omicron lockdown mean for the UK economy?

Posted by David Wilder | Category : Chart In Focus.

In providing a framework for thinking about how Omicron could impact the UK economy and policy-making, Chief UK Economist Paul Dales explains how GDP isn’t as far below pre-crisis levels as it was at the start of the January 2021 lockdown, implying there’s more room for it to fall in the event of another lockdown. … Continue reading “What would an Omicron lockdown mean for the UK economy?”

Omicron’s stark reminder that the global economic recovery hinges on the pandemic

Posted by Neil Shearing | Category : The Chief Economist's Note.

It says something when a currency loses 20% of its value in a matter of hours and still isn’t the week’s major market event. While Turkey will doubtless continue to struggle with the ramifications of its collapsed lira – and you can read all our coverage on the crisis here – investor attention has suddenly … Continue reading “Omicron’s stark reminder that the global economic recovery hinges on the pandemic”

Andrew Kenningham on the euro-zone’s fourth wave and the ECB

Posted by David Wilder | Category : Five Questions With....

New COVID-19 cases are surging in Europe with less than a month before the ECB’s key 16 December meeting. We asked Andrew Kenningham how this new wave could affect the Governing Council’s decision-making and the euro-zone economic outlook. Andrew is our Chief Europe Economist. He has overall responsibility for running our European economics service and … Continue reading “Andrew Kenningham on the euro-zone’s fourth wave and the ECB”

Central bankers face big messaging test as strains of recovery show

Posted by Neil Shearing | Category : The Chief Economist's Note.

One important point that’s easy to miss in the ebb and flow of the monthly data is just how quickly the global economy has rebounded from the COVID crisis. Global GDP fell by just over 10% between Q4 2019 and Q2 2020 – the biggest decline in recorded history. But it returned to its pre-virus … Continue reading “Central bankers face big messaging test as strains of recovery show”

EMs even less suited to ‘one-size-fits-all’ approach as pandemic takes toll

Posted by Neil Shearing | Category : The Chief Economist's Note.

Financial markets feed off grand narratives, and nowhere is this more true than in emerging economies. Depending on which narrative you believe, we are either in the early years of an “Asian Century”, in which the world’s centre of economic gravity will shift inexorably towards emerging markets, or EM catch-up will stall as countries fall victim to … Continue reading “EMs even less suited to ‘one-size-fits-all’ approach as pandemic takes toll”

From half empty to half full: consensus on the global outlook is now too optimistic

Posted by Neil Shearing | Category : The Chief Economist's Note.

In the depths of last summer’s global recession, we made the case for optimism about the economic outlook. Where the prevailing consensus was that the pandemic had dealt permanent damage to GDP, we argued that this downturn was unlike others: COVID-19 may change everything from how we work to the size of government, but it … Continue reading “From half empty to half full: consensus on the global outlook is now too optimistic”

Central banks are treading an increasingly fine line

Posted by Neil Shearing | Category : The Chief Economist's Note.

The past several days has seen a substantial repricing by markets in favour of earlier policy tightening by central banks. This hawkish shift was helped by the Bank of Canada, which last week called time on its QE programme and indicated that it could raise interest rates as soon as the second quarter of next … Continue reading “Central banks are treading an increasingly fine line”

How to think about shortages – and how policymakers should (and shouldn’t) respond

Posted by Neil Shearing | Category : The Chief Economist's Note.

Goods and labour shortages are now the biggest challenge facing the global economy – and central bankers and economic policymakers by extension. Yet much of the thinking around shortages is confused. In particular, there is a tendency to bracket together all shortages under a common banner, when in practice they are very different in nature.  … Continue reading “How to think about shortages – and how policymakers should (and shouldn’t) respond”

Look past the 1970s for today’s economic parallels

Posted by Neil Shearing | Category : The Chief Economist's Note.

Fuel shortages, tax increases and a whiff of stagflation have prompted comparisons between the economic situation today and that of the 1970s. But for the UK at least, the similarities with the period immediately following the Second World War are arguably more striking. Then, as now, there had been a huge shock to the UK’s … Continue reading “Look past the 1970s for today’s economic parallels”