Concerns are mounting as more cases of the Omicron variant of Covid are seen. There is still not enough analysis and data on the extent of the epidemic effect of the variant in the spreading stage. We're not entirely sure yet about factors such as the degree of symptoms, contagiousness and mortality, but Moderna's latest statement may cause some more concern. Moderna said existing vaccines against the new variant may be less effective. The current situation still needs to be approached cautiously, as there is a statement regarding the necessity of updating vaccines or suggesting deep restraint measures depending on the virus spread rate and size.
Currently, many countries impose travel restrictions or close their borders to foreigners to prevent the spread of the new variant in their countries. Japan and Israel closed their borders to international travelers. Many countries have restricted travel from several African countries, especially South Africa and Botswana. Countries such as England, Hong Kong, Canada, Germany, Italy, Netherlands, Belgium, Australia, Denmark, Czech Republic, Austria, Scotland are where the new variant is seen sporadically. Since these are the ones that have been detected, it is not known exactly when the new variant has been active and where it is spreading. WHO is also in the process of making an analysis to understand the seriousness of the new situation, and new findings related to this may give more reliable results. For now, we can evaluate positively; a statement that the symptoms of the new variant have been mild so far.
At this stage, it is necessary to evaluate the economic impact of the Omicron variant in terms of shutdowns or supply shortages. While the restrictive effects of closure or travel measures on economic activity, trade, supply of goods, employment and production increase the risks of slower growth; Adverse price effects on demand balance and product costs also increase inflation uncertainty. Biden seems to be keeping this off the table with his statement that a full shutdown is unlikely yet. Powell, on the other hand, did not fully associate it with monetary policy, but said that the new variant creates uncertainty. Therefore, the market has obviously shifted back its expectation that the Fed may raise interest rates in June, and before September 2022, it is considered premature at this stage. There is new evidence at hand, so the perspective may change a bit in planning.
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