Insight - Omicron variant resurrects the risk of US stagflation

New Covid concerns: A file picture showing workers at a best buy store on Black Friday in San Carlos, California. The drivers of high and persistent inflation continue to broaden, making further increases likely in the months ahead. — Bloomberg

LAST week’s economic and Covid-related news may well resurrect a risk narrative that makes policy makers and virtually all financial markets particularly anxious: US stagflation, that awful combination of rising inflation and declining growth.

How this risk plays out in the next few months, however, is less than certain, though not because of the inflation component, whose continued upward movement is a near certainty.