UBS: Central banks are too slow to tackle inflation

Central banks have not acted quickly enough to deal with rising inflation, said Axel Weber, the outgoing chairman of UBS Group AG, adding that he expects Europe and Switzerland to eventually raise their historically low interest rates.

“I have been talking about unpleasantly high inflation rates for over a year now,” Weber told the Neue Zuercher Zeitung in an interview published Saturday. “The central banks have largely ignored this in the hope that the issue will be resolved on its own.”

He warned, however, not to take “such massive countermeasures now that the economy has completely drowned and financial stability problems are emerging.”

Last month, eurozone inflation hit record highs following Russia’s invasion of Ukraine. Consumer prices rose 7.5% in March from a year earlier, up from 5.9% in February and up from an average of 6.7% in a Bloomberg survey.

In a worse case scenario, the world economy could soon be reminiscent of the 1970s with an energy crisis, massive increases in raw material prices and geopolitical conflicts similar to those during the Cold War, said Weber, who was in charge. of the German Bundesbank between 2004 and 2011.

The war in Ukraine and Western sanctions against Russia will not end globalization, but they will likely mark the beginning of a new era in which security policy will become a more important factor for governments and companies, Weber said.

“Energy security will shorten the transition to carbon offsets in the short term and governments will boost their defense investments,” Weber told the Neue Zuercher Zeitung. For citizens, this means higher energy costs and an increasing tax burden.

Weber said UBS does not accept any new business with customers based in Russia and its existing uncontrolled Russian customers with assets in excess of CHF 100,000 ($ 108,000) are subject to reporting obligations.

Russia is not a key market for UBS, Weber said, and the company will focus on the US and China in the coming years.