Mohamed El-Erian says central bank mistakes could trigger recession

  • Top economist Mohamed El-Erian said he believes the Federal Reserve has made two big mistakes that will go down in history.
  • “I fear we risk a very high probability of a damaging recession that is completely avoidable,” he said on Sunday.
  • The central bank is quick Raises interest rates In an effort to reduce 40 years of high inflation.

Top economist Mohamed El-Erian said the central bank made “two big mistakes that are going to go down in the history books” and triggered a “damaging” recession.

He speaks on that day CBS’ “Face the Nation” On Sunday, El-Erian told host Major Garrett, “I fear we are risking a very high probability of a damaging recession that is entirely avoidable.”

The Alliance’s chief economic adviser pointed to two mistakes made by the Federal Reserve. He said the central bank’s first mistake was mischaracterizing inflation as moderate. “By the way, it’s temporary, it’s reversible, don’t worry about it,” he said.

The second mistake, he added, was that the central bank finally recognized that inflation was stable and high, but “didn’t act in a meaningful way.”

Using a driving analogy, El-Erian said the fact that they didn’t ease their foot off the federal accelerator last year meant they had to cut back on the break this year “and it’s going to push us into recession.”

“So yes, unfortunately, this will come down to a major policy error by the Federal Reserve,” he said. “Also [Federal Reserve] Chair Powell went from looking for a soft landing to a soft landing and now talking about pain. That is the problem. This is the cost of the Federal Reserve being late. It must not only tackle inflation but restore its credibility,” he said.

Earlier this month, El-Erian Investors advised To end their “love affair” with the Fed Center, where the central bank will reverse its course of aggressive monetary tightening.

The central bank is quick Raises interest rates In an effort to reduce 40 years of high inflation in the US economy.

The September Inflation Report Released on Thursday. The Fed is expected to raise rates for the sixth time at its November 1-2 meeting, raising the federal funds rate to 3.25% from the current 3%. In its last three meetings, it has raised the benchmark rate by 75 basis points.

Changes in Federal funds rate – Interest banks charge each other to borrow money overnight – affects interest rates on loans, credit cards and bank accounts. when Mortgage rates will risePotential homebuyers may be pushed out of the market because of low prices.

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