ECB On Inflation, Diverging Policy, Turkish Lira Slide: Eco Day

(Bloomberg) -- Welcome to Monday, Europe. Here’s the latest news and analysis from Bloomberg Economics to help you start the week:

• The European Central Bank will adjust its monetary policy if upside risks to inflation materialize, said Governing Council member Robert Holzmann. Separately, its Governing Council member Pierre Wunsch said the ECB risks underestimating the threat posed by inflation and falling too far behind global peers in confronting soaring prices
• The U.S. and China are set to spend 2022 diverging on monetary policy, marking a new phase in the struggle to deal with the fallout of the pandemic and setting up a synchronized slowdown in the world’s two largest economies
  • Chinese banks lowered borrowing costs for the first time in 20 months, foreshadowing more monetary support to an economy showing strain from a property slump, weak private consumption and sporadic virus outbreaks
• The emergence of the omicron variant of Covid-19 is threatening to substantially alter the path of the pandemic. Bloomberg Economies sketched some worst- and best- case scenarios for the global economy
• What will it take to halt the Turkish lira’s slide? That’s the question investors are asking as they go into 2022 pondering the outlook for the worst-performing currency in emerging markets this year
  • Turkish President Recep Tayyip Erdogan pledged to continue interest-rate cuts that have made the lira the world’s worst-performing currency over the past three months, referring to Islamic proscriptions on usury as a basis for his new policy push
• The French economy is set to emerge from the Covid pandemic with trend inflation significantly closer to 2%, something monetary authorities had unsuccessfully battled to achieve since the global financial crisis more than a decade ago
• Australia’s most populous state could be playing “Russian Roulette” with its economic recovery by pressing ahead with a roll back of virus restrictions in the face of surging infections, according to AMP Capital Investors Ltd.’s Shane Oliver
• Goldman Sachs Group Inc. cut its forecast for U.S. economic growth after Senator Joe Manchin rejected the Biden administration’s roughly $2 trillion tax-and-spend program, leaving Democrats with few options for reviving the economic agenda
• India’s much-awaited cryptocurrency bill is unlikely to be presented in the ongoing session of parliament as the government has yet to finalize details of the legislation, according to people with knowledge of the matter

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