Whether it actually turns out to be more mild, as bad, or worse than the Delta variant, the latest COVID variant—the Omicron strain—is yet another reminder that the virus has not gone away, that it does mutate, and that those mutations might make the current vaccines less effective. The fact that it has emerged from the Southern African states, where vaccination rates are very low, is also a reminder that without broader global support from the developed market economies in terms of vaccines, it will be very difficult to fully eradicate the virus. It also comes as a poignant reminder about the risks to growth in the coming year as we start to think about how the economy is likely to develop.

With this in mind, in this Economics Weekly, we discuss the outlook for growth, inflation, monetary policy, and financial market performance. While we are optimistic about the outlook over the coming year, Omicron is yet another reminder that nothing is set in stone and events may be subject to change without notice—as such, “viewer discretion is advised.”

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Richard de Chazal, CFA is a London-based macroeconomist covering the U.S. economy and financial markets.