The Bank for International Settlements said on Monday that the newly discovered Omicron variant shows that policymakers and financial markets cannot lower their guard on COVID-19 and need to carefully scrutinize their policies.
Adding the central bank to the world’s central banks, Swiss-based BIS said Omicron has already caused collapses in major stock markets and added to the uncertainty.
“The rise of Omicron indicates that we should not let our guard down,” said Claudio Borio, head of the BIS’s monetary and economic department. “It was the latest reminder that we have to be vigilant.”
As uncertainty mounts over the potential human and economic costs of the new version, global financial markets are also waiting to see whether rising inflation prompts central banks such as the US Federal Reserve, the Bank of England and the European Central Bank to raise interest rates. inspires.
BIS said financial conditions have already tightened for many emerging market (EM) economies.
Government bond yields – a proxy for borrowing costs – have increased, particularly outside emerging Asia, while broad-based weakening of EM currencies has added to inflationary pressures.
‘Makes business complicated’
Omicron could exacerbate supply-chain constraints in the short term and some impact on economic activity was inevitable, particularly in the first quarter of 2022, Mr Borio said.
“It’s certainly making the trade-off a little bit more complicated than what the central bank was before,” he said.
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