(Bloomberg) -- BlackRock Chief Executive Officer Laurence D. Fink warned there is way too much optimism in financial markets as he predicted repeats of the market turmoil that roiled investors this week.
The experience of the marketplace this past week is going to be indicative of this entire year, Fink, 61, told a panel at the World Economic Forum in Davos, Switzerland today. Were going to be in a world of much greater volatility.
Fink, who runs the worlds largest asset manager, spoke after in emerging markets that was triggered by concern about Chinas economic growth and the Federal Reserves tapering of its monetary stimulus later this year. The MSCI World Index slid the most this week in five months.
As Davos delegates fretted about the robustness of economies from Turkey to Argentina, central bankers from the euro area, the U.K. and Japan used the stage to signal that monetary stimulus will remain in place.
Interest rates will stay at the present or lower level for an extended period of time, European Central Bank President Mario Draghi said. Bank of England Governor Mark Carney added theres no immediate need to raise rates.
Finks outlook challenged the relatively upbeat tone struck by others during the four-day gathering in the Swiss Alps, which began after the International Monetary Fund predicted the strongest world economic expansion since 2011. The meetings of the past seven years were clouded by jitters about financial crisis in the U.S. and Europe.
We can be cautiously optimistic about the global outlook, Bank of Japan Governor Haruhiko Kuroda told the panel.
While Fink agreed the overall trend is going to be fine, he predicted quite a bit of disruption and said the onus was now on governments to work to improve economies.
That troubles me, as there has been great consistency of dragging their feet by politicians, he said. The marketplace has been rather encouraged by good, consistent monetary policy across the world.
Fink spoke a day after Goldman Sachs Group Inc. CEO Lloyd Blankfein told Bloomberg Television that the weeks fall in markets wasnt surprising because asset values had risen sharply.
It would be very abnormal if we didnt have consolidating moves in the assets that have gone up so much, he said.
Fink predicted the U.S. economy will grow more than 3% this year and said the worlds economy had benefited from a soft dollar. By contrast, Europe needs a weaker currency and the euro at $1.36 is unsustainable, he said.
Appearing on the same panel, IMF Managing Director Christine Lagarde said central banks should continue to keep monetary policy loose until growth becomes well-anchored and then communicate their exit strategies clearly. She warned the risk of global deflation may be between 15 and 20%.
Draghi rebuffed speculation the European economy faces the threat of a prolonged decline in consumer prices. He noted that inflation excluding energy and food prices had been as low now as in the wake of past financial strains and that much of its decrease the result of downward pressure on prices in crisis-hit Greece, Ireland, Spain and Portugal that may reverse.
Our accommodative monetary policy will remain so, Draghi said. If the economy or markets deteriorate we are ready and willing to use all the instruments our treaty allows.
As for the U.K., which has recently displayed signs of economic strength, Carney said exceptional stimulus remains very relevant. He cited headwinds including spare capacity, sluggish European demand and tighter monetary conditions, including a strengthened pound. Even when the Bank of England does raise rates any such increase would be gradual, he said.
- U.S. Stocks Tumble Most Since June on Emerging Market Turmoil
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