# World’s top bankers expect markets to stay turbulent
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-11-02
Category: BANKING
Category URL: https://financedigest.com/category/banking
Meta Title: Central banks prepare to tackle inflation amid turbulence
Meta Description: Central banks are taking aggressive measures to control inflation, leading to market volatility. Geopolitical tensions are posing additional risks.
URL: https://financedigest.com/worlds-top-bankers-expect-markets-to-stay-turbulenthtml

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By Xie Yu and Summer Zhen

HONG KONG (Reuters) – Central banks will get inflation under control, but there will be turbulence in the near-term due to monetary tightening and geopolitical risks, top bankers said at a summit in Hong Kong on Wednesday.

Morgan Stanley CEO James Gorman said his gut feeling was that central banks would manage to curb price rises but investors would need to get used to higher inflation — of around 4% versus 1-2% before “this crisis”.

It’s a painful transition, but not an unexpected transition,” said Gorman, also the bank’s chairman, at the [Global Financial Leaders’ Investment Summit](https://www.financedigest.com/u-n-summit-aims-for-global-pact-to-protect-nature.html "U.N. summit aims for global pact to protect nature").

It was [Hong Kong’s](https://www.financedigest.com/screening-of-winnie-the-pooh-horror-film-cancelled-in-hong-kong.html "Screening of ‘Winnie the Pooh’ horror film cancelled in Hong Kong") biggest corporate event since it shut its borders in 2020 and introduced restrictions to combat COVID-19.

Major central [banks have embarked on some of the most aggressive round of rate rises](https://www.financedigest.com/in-a-rising-market-are-banking-outsourcers-pulling-their-weight.html "In a rising market, are banking outsourcers pulling their weight?") in decades in a bid to curb red-hot inflation, risking a downturn in the global economy.

Inflation and “very quick” monetary tightening after over a decade of relatively accommodative policies are making the [world more volatile and uncertain](https://www.financedigest.com/certainty-in-an-uncertain-world-post-brexit-investors-turn-to-commercial-property-and-fixed-returns.html "Certainty in an uncertain world – post-Brexit investors turn to commercial property and fixed returns"), said Goldman Sachs CEO David Solomon.

(It) allows exposures where there’s leverage in the system to be amplified very quickly,” he said, pointing to the situation in Britain, where former British Prime Minister Liz Truss’s mini-budget triggered a slump in gilts and liquidity crunch in [pension funds in September and early](https://www.financedigest.com/are-the-over-55s-accessing-their-pensions-early-failing-to-plan-for-later-life.html "Are the over-55s accessing their pensions early failing to plan for later life?") October.

If central [banks find a way to tame inflation](https://www.financedigest.com/be-really-really-careful-on-inflation-bank-of-englands-haskel.html "Be ‘really, really careful’ on inflation – Bank of England’s Haskel") meaningfully and in a balanced way, it will “increase the chance of a soft landing” for their economies, Solomon said.

Their comments come hours before the U.S. Federal Reserve is widely expected to deliver its fourth consecutive 75-basis-point interest [rate hike](https://www.financedigest.com/hopes-of-slowdown-in-rate-hikes-bolster-shares-ahead-of-u-s-gdp.html "Hopes of slowdown in rate hikes bolster shares ahead of U.S. GDP"). Investors are looking to see whether the central bank could signal a slowdown in the pace of monetary tightening, even as consumer [price inflation](https://www.financedigest.com/uk-shop-price-inflation-hits-record-8-in-january-brc-2.html "UK shop price inflation hits record 8% in January: BRC") is running above 8%.

Bankers at the conference also worried about [geopolitical risks](https://www.financedigest.com/markets-pricing-some-geopolitics-but-risk-premia-can-grow-further-goldman.html "Markets pricing some geopolitics, but risk premia can grow further -Goldman"). Those have been growing as the Russia-Ukraine [war escalates and tensions between China](https://www.financedigest.com/russia-sharply-scales-back-far-east-war-games-with-china.html "Russia sharply scales back Far East war games with China") and the United States intensify.

If I had one or two concerns, the spreading of geopolitical tension would be one,” said Liu Jin, President of [Bank of China](https://www.financedigest.com/asia-shares-bank-on-eventual-china-opening-oil-gains.html "Asia shares bank on eventual China opening; oil gains"), without elaborating further.

Michael Chae, Blackstone’s [chief financial officer](https://www.financedigest.com/host-analytics-appoints-chris-labruna-as-chief-revenue-officer.html "Host Analytics Appoints Chris LaBruna as Chief Revenue Officer"), also highlighted “rising tensions around the world” and the threat they pose to stability.

Monetary and geopolitical uncertainties have put investors on the sidelines, said UBS Group Chairman Colm Kelleher, pointing to the “record levels of cash” in global [wealth management](https://www.financedigest.com/wealth-management-consultant.html "Wealth management consultant") accounts as evidence that people are holding on to their money.

Clients are clearly on the sidelines, as you’ve had over the last nine months pretty dire returns in equities and [fixed income](https://www.financedigest.com/fineco-ceo-expects-fixed-income-demand-to-help-managed-assets.html "Fineco CEO expects fixed income demand to help managed assets"), and commodities, except for selective spots,” he said.

(Reporting by Xie Yu, Summer Zhen and Kane Wu; Editing by Ana Nicolaci da Costa)


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