Equity and bond markets risk sell off as central banks, including the Federal Reserve, may be forced to raise rates more than investors currently estimate in order to curb the acceleration of inflation. This is what Tobias Adrian, director of the money and capital markets department of the IMF (International Monetary Fund) and former senior deputy director general of the Federal Reserve Bank of New York said.
Thus Adrian in an interview with Bloomberg, following the announcement of the Fund, which yesterday announced that it had cut the estimates on global GDP growth, relating to both 2022 and 2023, to a pace equal to +3.6 %.
“Central banks may have to adopt a more restrictive monetary policy than is currently priced, which means there could be some surprises going forward,” the economist said. bonds will also be hit by further sell-offs. Credit spreads have widened, albeit not dramatically so far, and yields could rise further. There could be more sell-offs in fixed income, among sovereigns. As a result, I believe that nothing is safe at this moment. “
The chances of a strong market sell-off would increase, Adrian said, if central bank monetary tightening were accompanied by a recession.
The IMF expects an inflation rate of 5.7% for advanced economies and 8.7% for emerging and developing countries by 2022.
The flare-ups of inflation should then slow the pace in 2023, with consumer price indices expected to grow by 2.5% and 6.5% respectively in the aforementioned areas.
Focus on the boom not only in energy prices, but also in food prices, the trend of which is particularly dangerous in the poorest countries, including sub-Saharan Africa, where families spend up to 60% of their budget on purchase of food, compared to just 10% in advanced economies.
The prices of foodstuffs, the Fund recalled, are rising due to the interruptions affecting the production of Russia and Ukraine, due to the ongoing conflict.