The International Monetary Fund (IMF) has warned of possible sell-offs in the markets as central banks try to combat higher inflation.
Market players had started the year on an optimistic footing, predicting some economic momentum on the back of an easing of Covid-19 restrictions, which would likely provide a boost to stocks. However, sinceon Feb. 24 that outlook has worsened — with further supply chain shocks and energy price rises.
"There is certainly a risk of further sell-offs," Tobias Adrian, director for monetary and capital markets at the IMF, told CNBC Tuesday. "The intended consequences of monetary tightening is to tighten financial conditions to slow down economic activity and I would not be surprised if we were to see a certain amount of readjustment of asset valuations going forward and that could be in equity markets as well as in corporate bond markets and sovereign markets," he added.
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