The chairman of UBS told CNBC that central banks around the world will stick to the path of policy normalization in a bid to avoid the risk of volatility in markets.
Policy normalization is the attempt by central banks to reduce the size of their balance sheet and raise benchmark interest rates so that monetary policy returns to the environment prior to the global financial crisis in 2008.
Speaking to CNBC's Joumanna Bercetche in an exclusive interview at the UBS European Conference in London on Wednesday, Axel Weber said that global liquidity, while still increasing would soon start to shrink as central banks stopped buying assets.
"That's going to produce a headwind to global markets, but the central banks are confident enough they can manage the situation and that their monetary policy normalization is the right way to go," said Weber.
Weber said central banks fear that continued easy monetary policy will build up risks in markets as volatility grows, putting strain on any financial instabilities.
The U.S. Federal reserve has led the charge in raising interest rates, leading to some criticism that the world's most influential central bank could choke off economic growth. That concern has been reflected in equity markets. The Dow Jones Industrial Average lost 600 points on Monday, and as of Tuesday 65 percent of S&P 500 stocks were considered to be in correction territory.