Economic Outlook Q1 2022

· Change can be difficult to digest, especially at first, and the attendantuncertainty that comes with the change in the policy environment likely meansthat volatility will remain elevated over the near term.

· When the dust settles and the outlook clears, especially if the pandemic beginsto subside in earnest, as anticipated, in the months ahead (a very welcomechange), it appears that the constructive macroeconomic fundamentals shouldkeep growth momentum on a decidedly upward trajectory.

· The strength in consumer finances, potential upswing in business investment andthe boost associated with a broader/full reopening of activity (especially inservices) should mean that the economy can absorb modestly higher interestrates. Additionally, it is important to recognize that rates globally are stillat historically low levels and real rates remain deeply in negative territory,while the likes of the European Central Bank and Bank of Japan are maintaininghighly accommodative monetary policies and are continuing to add liquidity intothe financial system.

· That suggests that the odds remain low that monetary tightening this year willbe sufficient to knock global economic growth off its track.

· As the expansion matures further out on the forecast horizon, however, thequestion of whether“ this time will be different” will again rise. Centralbanks have historically struggled to calibrate monetary policy in such a waythat financial conditions do not tighten too much, too quickly — andultimately, efforts to find a remedy for inflationary pressures end up beingworse for growth than the disease itself.

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