We expect inflation to remain stubbornly high in 2022, forcing the Fed to tighten monetary policy aggressively even though real economic growth underwhelms. The chances of additional fiscal stimulus have dwindled and will drop off the table entirely if the Republicans win back control of both the House and/or Senate in November’s mid-term elections. The sheer magnitude of Omicron infections will weigh on employment and economic activity in the next few months, but some of the output will be made up later this year.
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