Fabio Natalucci on How to Think About Financial Risk Right Now

Odd Lots

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🗓️ 9 February 2023

⏱️ 47 minutes

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Summary

The Federal Reserve raised interest rates at the fastest pace in decades in 2022. But despite the rapid shift in borrowing costs, not much in the financial system actually 'broke.' Stocks and other risk assets went down, but aside from a few issues like the gilt market drama in October, we didn't see a big systemic event. On this episode of Odd Lots, which was recorded live at the Credit Market Structure Alliance conference in New York, we speak with Fabio Natalucci about how he's thinking of financial risk right now. Fabio is the Deputy Director of the Monetary and Capital Markets Department at the International Monetary Fund and he writes the IMF's annual financial stability report. He walks us through the key risks he sees as still lurking in the system, as well as what's changed since 2008.

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1:07.1	Hello and welcome to a special episode of the Odd Lots podcast. I'm Tracy Alloway. I'm Jill
1:24.9	Wyesenthal. So this is a live recording that we are doing at the Credit Market Structure Alliance
1:30.6	Conference. We are going to be talking about one of the thorniest most controversial topics in
1:36.6	financial markets, and it's not compensation. It's liquidity. Right. And so obviously,
1:43.0	it's kind of a wild year for markets overall in 2022. I guess markets have been a little bit more
1:49.9	constructive, calm so far to start 2023. But I mean, I think it's still pretty clear that people
1:56.6	are anxious about what are the various risks lurking out there, particularly coming off such a big
2:02.6	pricing of interest rates and such an uncertain macro environment. That's exactly right. And we have
2:08.2	had instances where liquidity risk has reared its head recently, notably with some real estate funds
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