Omicron shows that policy makers can’t be vigilant: BIS


London — A newly discovered variant of Omicron shows that policy makers and financial markets cannot weaken their vigilance against COVID-19 and must carefully coordinate their policies, the Bank for International Settlements said. Said on Monday.

The Swiss-based BIS calls the central bank the world’s central bank because of its regular gathering of decision makers, and Omicron has already caused major stock market declines and increased uncertainty. Stated.

“The emergence of Omicron shows that vigilance should not be relaxed,” Claudio Borio, director of the Monetary Economy at BIS, told reporters. “This was the latest reminder that we have to be careful.”

With increasing uncertainty about the potential human and economic costs of the new variant, global financial markets have seen rising inflation raise interest rates on major central banks such as the Federal Reserve, the Bank of England and the European Central Bank. I’m waiting to see if it’s urging.

Many emerging market economies are already in a tight financial position, according to a BIS report. Except in emerging Asia, government bond yields (substitutes for borrowing costs) are rising, while widespread weakening of EM currencies is exacerbating inflationary pressures.

Omicron could exacerbate supply chain bottlenecks in the short term, with impacts on economic activity inevitable, especially in the first quarter of 2022, Borio said.

“Of course, this makes the trade-offs facing central banks slightly more complex than before,” he added, but dealing with such complexity is now familiar to policy makers. It was something that was there.

As always, the BIS report also included an analysis of specific market issues.

For one thing, the Swiss-based forum said that investment funds need bank-like rules to prevent financial instability in the market crisis.

Policy makers warned that there is a risk of lagging behind the regulation of financial institutions that account for half of the world’s financial activity, such as hedge funds, pension funds, insurance companies and money market funds.

Emerging economies in Asia also need to be more flexible in currency hedging as foreign exchange liquidity risk monitoring is improved and increased dollar investment makes the region more vulnerable to currency fluctuations.

Mark Jones