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Yemen, Ukraine conflicts could unsettle outlook for this year: SBI report

Concerns over economic recovery rise

Conflicts relating Yemen and Ukraine have unsettled the economic outlook for the new year impacting the global stock market as well.

Besides, the resurgence of the Covid 19 infections in several parts of the world including China could dent supply chains thus dampening economic recovery. However, the silver lining is that many countries have factored in the current Covid 19 infection wave.

“The markets may have factored in that the current omicron will result in an endemic stage in the covid cycle and thus a faster normalization of economic activities,” the State Bank of India’s economic report said.

Also read: US to impose personal sanctions on Putin if Russia invades Ukraine

With inflation persisting at high levels, several emerging market economies (EMEs) were first off the mark in normalising and even tightening monetary policy. In advanced economies (AE) too, persistent price pressures have induced some of them to raise policy rates.

The report also noted the US Federal Reserve (Fed) has dropped any reference to inflation as "transitory," with the central bank instead acknowledging that price increases had exceeded its 2 per cent target "for some time."

“Build up to first Fed meeting has already seen sharp correction in equity prices and rise in treasury yields in the US,” the report said.