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00:00It seems that investors are very much divided on how transitory inflation will be in 2022 to the monetary policy implications of that. How are you looking at price pressures right now. Yes of course we shouldn't be surprised because this is a if you like uncharted territory. It's facing our generation for the first time such a global pandemic. And obviously we can understand why there are divergences of views. There are obviously some who are arguing for stagflation in the if you like in 2022. And of course comparing it with 1970s I have to say not everything that we are doing now is similar to 1970s. And the world economy is a different world economy to the 1970s. At the same time as you stated the issue here is whether we move from a transitory phase of inflation to real inflation if you like over time. And of course one of the key factors which at the end of the day would define whether inflation would stay if you like with us is the expected inflation in the minds of producers consumers and others. But nevertheless we know that many forecast with regard to the global economy are showing that the global economy is going to grow quite well in 2022. And it is possible that basically we could contain the inflation which is now surging in a number of countries including in the US and the European Union. But as you said it is just in a number of countries. Right. What seems clear right now is that inflation is really not hitting everyone the same. And we are seeing many countries across Asia that are not seeing this inflationary pressure as what seems certain from that environment right now is that we are definitely going to see policy divergence. How do you how do you see the market impact of that. Where are you going to see the rate divergence being felt the most. Yes. And I think that is the very issue when it comes to actual inflation in a sense that we might face with a situation where for instance you can see China basically being trying to contain its property booms dealing with many problems with developers in 2021. They might basically be in a completely different economic situation in 2022 as opposed to what we are experiencing in the US or European Union. And I think the forces of these inflationary if you like effects as opposed to the inflationary effects around the world in a world which is highly interconnected as opposed to 1970s may well end up to create a situation where the global inflation and in effect in that are some of the global economies such as the US and European Union may be able to contain the inflation if you like during 20 22. Where do you place the odds of a policy misstep from the Fed in this kind of environment. Well I think this is again as I said it is an uncharted territory because we are dealing with so many unknowns when it comes for instance to supply chains when it comes to consumers behavior as well as the actual Covid-19 which is creating different variants. And of course it creates different phases for producers for consumers. And of course in this context we know that the US Fed is willing to increase interest rate in 2022. And I think they would be expecting to see more data as a result of Army corn probably in the earlier part of 2022. And also see how the Chinese economy is going to evolve. Asian economies going to evolve. And so consider all these issues and look at their options basically. You mentioned a minute ago that the world is more interconnected than it is in the 1970s or was. But do you anticipate that maybe that trend could reverse. Because if we look over the last two years we've had the pandemic. We've had border closures trade disputes the supply chain upheaval. Do you see any trends emerging around near assuring north near shoring and offshoring and maybe some of that interconnectedness becoming a bit more disconnected. Yes. Obviously the more the world economy becomes interconnected. The issue of resilience of the global economy comes into question. And I think that issue shouldn't be underestimated. At the same time our ability to learn from if you like the experience of Covid-19 since 2020 should then be underestimated. And of course with that in mind what we know is for instance produces suppliers are learning how to deal with if you like disruptions in the economy. And I think that force also shouldn't be underestimated. At the same time we know that the stock market has been growing very well and there are anticipations that the stock market could do well. But naturally the more the global economy becomes interconnected the risk of systemic risk itself could rise. In other words we can't be complacent about systemic risk. If there is something which could trigger if you like systemic risk. But nevertheless the ability of policymakers and central banks as well as business have enhanced significantly over the last two years.

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IGF Director on Global Risks in 2022

Fariborz Moshirian is Director of the Institute of Global Finance (IGF) at the UNSW Business School. He discusses some of the risks and headwinds facing investors in the year ahead. Moshirian speaks on "Bloomberg Daybreak: Australia" with Paul Allen and Shery Ahn. (Source: Bloomberg)

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