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New COVID Variants Creating Challenge in Global Economic Recovery: Moody’s

As central banks across the globe tighten monetary policy more aggressively through interest rate hikes in order to curb the rising inflation, financial conditions have now become less favorable.

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Though the overall virus-related concerns have eased with COVID infections becoming less deadly, a spike in new infections across G-20 economies is, however, a reminder that the emergence of newer and more dangerous variants remains a risk to the global economic outlook, said global research and rating agency Moody’s in a report ‘Economic Pulse Check: Alternative Data Monitor’.

As central banks across the globe tighten monetary policy more aggressively through interest rate hikes in order to curb the rising inflation, financial conditions have now become less favorable.

“Higher borrowing costs are adding to pressures on households and firms, increasing risks to aggregate demand,” it said in the report.

Economic activity has slowed further, as inflation and tightening credit conditions weaken consumer and business sentiment, thereby denting purchasing power.

The silver lining, according to the report, is that disruptions in the shipping sector and shortages of key inputs are slowly beginning to resolve, and food prices are decreasing, which in a way is easing supply-side inflationary pressures.

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