Monetary Policy Report – January 2022

Despite the strong recovery in recent times, global growth momentum could moderate in the near-term on the back of the relentless supply chain bottlenecks, high input costs and pandemic-related uncertainties. With sustained price pressures, most central banks are also poised to tighten monetary policy which may result in higher interest rate regimes in the global economy. Therefore, rising long-term bond yields and a strong U.S. Dollar will characterise overall financial conditions. The spill over of these events could translate to currency pressures, especially in emerging market economies with weak fundamentals and large foreign currency debt, which could become evident in the course of 2022. Financing needs will subsequently rise and pose challenges for sustaining the growth recovery in the face of rising inflation and unsustainable debt levels.