UBS Chairman Axel Weber talked about the high rates of inflation plaguing major world economies during a Monday conference on monetary policy, claiming that the recent uptick of commodity prices is a sign that inflation could get even higher in the coming days.
During the 22nd edition of UBS’s flagship Greater China Conference (GCC), Weber said that inflation levels were persistently high in the United States, and may continue in the United Kingdom and Europe. The virtual event features five days of keynote speeches from speakers including Ray Dalio, founder of Bridgewater, and Dr. Zhu Min, Chairman of the National Institute of Financial Research at Tsinghua University.
Commodity price fluctuations often lead the economy when it comes to inflation. When there is a general increase in demand, commodities react more sensitively and rapidly compared to the economy as a whole.
At present, supply chain disruptions have affected almost all major shipping routes around the world; 90 percent of world trade moves by sea. These supply constraints in delivering key raw materials immediately affect the price of the corresponding commodity. Once a finished product finally makes it to the shelf, the retail price will be higher and inflation would be realized.
The shipping crisis hit when the economy opened after prolonged periods of lockdown and the demand for products spiked, especially during the holiday season. A highly synchronized organizational structure was disrupted and freight companies could not manage the sudden surge in consumer demand.
If these bottlenecks persist, prices will remain high. This may result in an overall change regarding how the world conducts trade. When essential commodities are short in supply, frictions between and within nations may lead to large-scale skirmishes and conflicts may break out, based on an analysis by think tank Rand.
“‘What we need today is not forecasts but the recognition that we live in a very uncertain world; and to develop robust strategies that thrive in all scenarios.’ Axel A. Weber, our Chairman, opens the UBS Greater China Conference,” UBS shared on Twitter on Monday.
Weber had previously talked about “uncomfortably high” inflation during the November Bloomberg New Economy Forum in Singapore.
UBS’s wealthy clients were also said to be moving away from riskier assets towards more conservative investments in order to protect their fortunes from value depreciation.
When institutions and major players divert funds, riskier assets like cryptocurrencies suffer. Bitcoin has touched a new low since September, as the world’s largest cryptocurrency with a market capitalization of over $800 billion lost more than 37 percent of its value from a record high of $69,000 in November.