A top International Monetary Fund official said there is a risk of a sell-off in global stock and bond markets as central banks, including the Federal Reserve, could be forced to raise interest rates higher than investors expected to tame inflation.
Tobias Adrian, director of the IMF’s Monetary and Capital Markets Department, and Tobias Adrian, a former senior vice president, said a major market sell-off would likely increase if monetary policy is tightened, combined with a recession. federal Reserve Bank of New York, said in a phone interview on Tuesday.
The Washington-based fund earlier in the day slashed its world growth forecast by the most since the first months of the Covid-19 pandemic, and warned of even sharper inflation after Russia invaded Ukraine and China renewed virus lockdowns. guessed.
Adrian said, “Central banks may have to tighten further than the current price, so there could be surprises down the road. I think there could be another sharp sell-off in equities. Bonds may sell further. There is credit spread.” Widen, but not as dramatically so far. And yields could go up. There could be further selling in fixed-income, sovereign securities rates. So I think nothing is safe right now.”
The IMF sees inflation for this year at 5.7% in advanced economies and 8.7% in emerging and developing countries, significantly higher than a few months ago. The pace of consumer-price growth in each group of nations is expected to slow to 2.5% and 6.5%, respectively, in 2023. The IMF cited the increased risk that inflation expectations go unchecked, leading to more aggressive central bank tightening.
In the US and parts of Europe, inflation is rising at the fastest pace in decades, raising hopes for central banks to tighten monetary policy more quickly than previously thought.
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