- Global economic growth is expected to slow during the year, but remains above trend. Expectations of a moderation in inflation over the course of the year could be dampened by inflationary pressures resulting from the conflict in Ukraine.
- Despite increased geopolitical risk affecting growth, central banks in developed markets are moving towards tighter policies, the US Federal Reserve is expected to hike rates in March, the European Central Bank is curbing asset purchases and the Bank of Japan remains pending. Emerging market central banks may need to raise interest rates to defend their currencies against a stronger US dollar and to contain inflation.
- Short-term rates are biased higher with central bank tightening, while long-term rates balance fears of slowing growth, the path of inflation and risk aversion sentiment.
- Key risks to global markets include the conflict in Ukraine, inflation accelerating from already high levels, central bank missteps, the emergence of variants of COVID-19, and the trajectory of China’s growth.
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