The world is grappling with yet another variant of the virus. While India has made commendable progress on the vaccination front — its scope has now been expanded — Omicron, and its economic implications will dominate the discourse. So, what else is likely to dominate the headlines in 2022?
First, the return of inflation. Inflation has surged to record levels across major economies. While most central banks had expected a rise, it was expected to be “transitory”. However, this has not been the case, prompting several central banks to become cautious. The Federal Open Market Committee (FOMC) members have bought forward their rate hike expectations, and several other countries have already begun tightening. Given this, inflation would be the key variable to track in 2022. A faster-than-expected normalisation could lead to financial volatility, which in turn could affect growth prospects.
Second, market tantrums. Asset valuations are stretched and any adverse