ECB’s Makhlouf: ‘Global Financial Markets Are Fraught with Risk’; Must Remain Vigilant

24 November 2022

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Gabriel Makhlouf on Thursday said that financial markets around the world were susceptible to disruptions in the wake of global monetary policy tightening.

In remarks made on the publication of the Financial Stability Review of the Central Bank of Ireland, which he heads, Makhlouf said that ‘[s]ince June, the true extent of that inflation, both in its broad-based nature, its intensity and its persistence, has become more apparent.’

The ECB, he noted, had already hiked rates by 200bp, ‘and will be going further’.

‘As we and other central banks take the necessary steps to bring inflation back to target, there are undoubtedly risks of further asset price falls and, more significantly, potential episodes of disruption in segments of global financial markets’, he said. ‘We must remain vigilant.’

It is hard to predict how vulnerabilities that have built up under low interest rates will manifest, he said. Global financial markets are ‘fraught with risk’.

Meanwhile, high inflation is eroding living standards, making debt servicing difficult and putting pressure on profit margins, he said.

‘Taken together, these pressures are leading to significant downgrades in growth forecasts across the globe’, he said, including in Ireland, even if ‘for the moment our central expectation continues to be for positive if lower growth and a robust labour market through 2023.’