UBS CEO Warns of Global Economic Risks, Expects Central Banks to Hike Rates

UBS Group CEO Sergio Ermotti warned that investors have become overly complacent about accumulating geopolitical and economic risks, despite recent market volatility. He noted that investors' tolerance for risk has increased due to the artificial intelligence investment boom, which has supported economic growth and financial market performance.

The current geopolitical environment is highly complex, with multiple pressures unfolding simultaneously: energy and shipping risks from the Iran and Ukraine conflicts, supply chain strains from international competition, rising borrowing costs, and inflation that remains stubbornly above central bank targets. These factors compound one another, creating multiple headwinds for the global economy.

Ermotti expects the European Central Bank, the U.S. Federal Reserve, and the Bank of Japan to all potentially raise interest rates in the coming months. He emphasized that markets should not expect borrowing costs to quickly return to low levels, as inflationary pressures are still present and have not abated.