The recent rise in financial market volatility is a cause for concern but the increase is due to uncertainty over the impact of higher interest rates on inflation and growth, Saudi Arabia's central bank chief said on Sunday.
Stock and commodity markets world-wide tumbled and emerging market assets were sold off in recent weeks as expectations rose that major central banks would push interest rates higher.
"It is volatile now. It is normal where there are uncertainties with regards to interest rates, the impact of the increase in interest rates on inflation and economic growth," Hamad Saud al-Sayyari, governor of the Saudi Arabian Monetary Agency, told Reuters.
"Volatility is a cause for concern," he added, speaking on the sidelines of the annual central bankers meeting at the Bank for International Settlements.
A period of super loose monetary policy, put in place after the technology stock collapse in 2000-2001, has led to uneven global growth and frothy asset prices, particularly in commodities, real estate, debt and some emerging markets.
A market sell-off began in early May when investors grew more concerned that inflationary risks would prompt the US Federal Reserve to push interest rates beyond 5 percent.
The Bank of Japan is also preparing to end to its zero rate policy and the European Central Bank has raised rates three times in the past six months, signalling a few more yet to come.
Gold has slumped 18 percent since May 10, Japan's Nikkei 225 index is down 11 percent and European stock indices are off about 8 percent. Stock and currencies in emerging markets, such as Russia and Turkey, have been hit even harder and debt spreads have widened.
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