Turmoil in the banking sector means central banks face in increasingly 'delicate dance' in their efforts to rein in inflation, World Economic Forum Managing Director Saadia Zahidi told CNBC.
for the embattled regional lender after it was seized by the California Department of Financial Protection and Innovation.as JPMorgan Chase acquired nearly all of First Republic's deposits and a majority of its assets.
Yet several leading economists told a panel at the World Economic Forum Growth Summit in Geneva on Tuesday that higher inflation and greater financial instability are here to stay. "People haven't pivoted to this new era, that we have an era that will be structurally more inflationary, a world of post-globalization where we won't have the same scale of trade, there'll be more trade barriers, an older demographic that means that the retirees who are savers aren't saving the same way," said Karen Harris, managing director of macro trends at Bain & Company.
Harris added that this doesn't mean that actual inflation prints will be higher, but will require real rates to be higher for longer, which she said creates "a lot of risk" in that "the calibration to an era of low rates is so entrenched that getting used to higher rates, that torque, will create failures that we haven't yet seen or anticipated."
She added that it "defies logic" that as the industry tries to pivot rapidly to a higher interest rate environment, there won't be further casualties beyond SVB, Signature, Credit Suisse and First Republic.
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