The global capital, digital asset and gold markets are likely to face intense volatility in the short term as investors anticipate the Federal Reserve will pursue hawkish monetary policies next year, aiming to curb the spiralling inflation rate that recently hit a 40-year high at 6.8%.

Investors expect the Fed will double the pace of its quantitative easing (QE) tapering from US$15 billion to $30 billion per month, as well as raise interest rates by mid-2022, earlier than the present schedule of 2023-2024, at its meeting on Wednesday.

Kobsak Pootrakool, senior executive and vice-president of Bangkok Bank, said the 40-year peak for US inflation should lead the Fed to ramp up its QE tapering and raise interest rates faster than expected.

The central bank’s tightening of its monetary policies will cause massive outflows from the global stock, bond, cryptocurrency and gold markets in the short term and propel investors to seek refuge in the US Dollar Index, he said.

Mr Kobsak said a high inflation rate is a huge risk to the economy because it can induce an economic bubble. Therefore, the Fed must employ contractionary monetary policies to control inflation, he said. However, such policies will cause volatility in fund flows around the globe.

Thai markets will be affected in the short term, but Mr Kobsak believes the country’s public and private sector financial positions are strong and will recover in a short period.

He predicts other emerging markets such as Turkey, Venezuela, South Africa or countries with weakening currencies could be heavily affected.

“Investors must invest cautiously during this period and closely follow the news regarding major central banks’ decisions on their monetary policies. They should also sell to take some profits until US inflation subsides,” said Mr Kobsak.

Finansia Syrus Securities said in addition to the Fed’s action on monetary policy, another factor to follow is the economic impact of the new Covid variant Omicron.

While Omicron is spreading throughout the world and poses a high global risk of an infection surge, the variant reportedly causes milder symptoms that can be prevented by existing vaccines.

Pfizer recently stated its Covid vaccine is 33% effective in preventing infections from Omicron, but 70% effective in preventing serious illnesses and hospitalisation.

For Thailand, the pandemic is an overhang factor affecting stocks helped by the country’s reopening in the short term. However, the Thai bourse still has opportunities to grow in the medium and long term from progress in the distribution of booster shots, said the brokerage.