January Global Macro Monthly – Omicron to a Russian Rubicon

Global Market

Key points


  • Omicron cases appear to be peaking in countries exposed early, but it is spreading more broadly. Hospitalisations have been relatively light, but disruption is still likely.
  • Russia-Ukraine border tensions are rising and having a spillover effect in energy and risk asset markets.
  • Inflation rose in several developed jurisdictions in December but should be near peak. Omicron and geopolitics to keep rates elevated over the coming months. Visible disinflation expected after the Spring.
  • Elevated inflation and tight labour markets are resulting in developed market central banks tightening policy sooner than previously expected. We expect the Federal Reserve to tighten policy in March, but the European Central Bank to hold off into 2023.
  • The growth outlook is softer in the short-term reflecting Omicron disruption and an income squeeze. We also lower our US growth outlook on faster policy tightening.

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