October 1, 2022

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Larry Fink, president of BlackRock, believes inflation will be higher than expected — and that we lack the tools to keep up.

Larry Fink, president of BlackRock, believes inflation will be higher than expected — and that we lack the tools to keep up.

Larry Fink, president of Blackrock, one of the most powerful and important men on Wall Street, believes that the war in Ukraine is a powerful impediment to globalization. In a telephone conversation with several thousand investors around the world, Fink must have said that the war would lead to widespread changes in the global economy. It’s Bloomberg News reports Wednesday evening.

As a result of rising energy and food prices, along with “bad long-term planning of governments”, inflation is believed to be higher than expected in the future.

“Central banks may not have the monetary policy tools to deal with any of the structural problems,” Fink said. The senior manager, general manager of the world’s largest asset manager, Blackrock, notes that geopolitics will be more important to world leaders than cheap consumer goods in the near future, and said people should settle for higher prices.

In recent weeks, oil and gas prices and a number of basic commodity prices have risen significantly. Never before, for example, has the price of nickel soared as it did on Tuesday morning, when it soared to more than $100,000 per ton on the Shanghai Stock Exchange, up more than 250 percent.

According to Fink, the West’s reaction to the Russian invasion of Ukraine shows the power that lies in market access.

Get rid of Russian dependency

According to Bloomberg, Fink emphasized that Blackrock had never trusted Russia as a wise place to invest, but acknowledged that they invested something there on behalf of clients and highlighted index funds in emerging markets and natural resources.

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Going forward, Fink believes companies will re-evaluate their dependence on global value chains and invest more in local production capacity. Germany will spend more on defense, while Europe in general will try to become independent of oil and gas imports from Russia. Fink is said to have said this will increase costs and eventually show up in the next earnings cycle.

“The short-term impact will be bumpy,” Fink predicts.

High inflation and low growth

Market participants continue to watch energy and commodity prices with scrutiny. The US inflation rate for February is expected to be 7.8 percent, the highest level in 41 years. The US Federal Reserve said several months ago that high inflation would be temporary. At the same time, there is a risk that the war in Ukraine will reduce economic growth. It creates trouble for central banks.

Central banks may have to choose between plague or cholera. Ongoing inflationary pressures across commodity markets, along with tight labor markets, may further increase wage growth. Then central banks have to choose whether to tighten to beat inflation, and thus risk tightening in a situation where the economy is under pressure from rising prices and declining purchasing power, or they can choose to consider the situation and outward inflation risks. control, Formue chief strategist Christian Lie to DN said on Wednesday.

It is a challenge for central banks, because almost no matter what they do, they risk doing what could later be seen as a monetary policy error. Lee thinks there is reason to believe that the ECB in particular will wait for a rate hike now, despite inflationary pressures.

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Rising inflation fears and a slightly higher willingness to risk send interest rates on US 10-year government bonds, which are considered a safe haven for investors, as high as 1.91 percent, compared to 1.85 percent earlier in the day. The bond price and the interest rate move in opposite directions.(Terms)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using a link that leads directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.