The combination of high inflation with central bank policy uncertainty 'creates this environment of really high risk and volatility.'
which have driven up the risk of a severe downturn to levels not seen since the onset of the COVID-19 pandemic.
“It’s difficult to think of a time where uncertainty was so high,” said Tobias Adrian, director of the IMF’s Monetary and Capital Markets Department. “We have to go back decades to see so much conflict in the world, and at the same time inflation is extremely high.” The combination of high inflation with central bank policy uncertainty “creates this environment of really high risk and volatility,” he said.
“When risk is high, correlations are high,” Adrian said. “So spillovers and contagion [are] at a higher level in these times of high uncertainty.” In its latest Global Financial Stability Report, the IMF warned that global financial stability risks had increased since the“The global environment is fragile with storm clouds on the horizon,” the report stated.ongoing efforts by central banks worldwide to raise rates to combat it“With investors aggressively pulling back from risk-taking recently as they reassess their economic and policy outlook, there is a danger of a disorderly repricing of risk,” the report stated.
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