Economist Mohamed El-Erian Says Fed’s Characterization of Inflation as ‘Transitory’ the ‘Worst Call in History’  – Economics Bitcoin News

On Monday, December 13, following Friday’s U.S. consumer price index report published by the Bureau of Labor Statistics, Americans are discussing the Federal Reserve. There have been thousands of Twitter conversations about the Federal Reserve as the U.S. has experienced high inflation. Furthermore, Mohamed El-Erian, the chief economic advisor for the German multinational financial services company Allianz says the term “transitory” was the “worst inflation call in the history,” according to a recent interview.

Allianz Chief Economic Advisor Says Calling Inflation ‘Transitory’ Was a Bad Call by the US Central Bank

Members of the Federal Open Market Committee (FOMC) told Americans at the April 2021 end that they would maintain the benchmark interest rate close to zero, and continue monthly bond purchases. The FOMC’s and Fed chair Jerome Powell’s statements stressed that inflation would only have “transitory effects” on the American economy. Not only did members of the Fed say inflation would be temporary, but it was also parroted routinely by the media, U.S. policymakers, and America’s banking giants as well.

Just before the Bureau of Labor Statistics’ November consumer price index (CPI) report was published, the ‘transitory’ talking heads started to back peddle on saying that inflation was temporary. CPI’s latest report showed that it rose to 6.8% during the same time frame in 2020, its highest level in nearly 40 years. Americans continue to complain about the U.S. central banking as their cost of goods continues to climb month after month.

For instance, the name “Federal Reserve” is trending quite a bitOn Twitter, the tweets can be found in thousands of other tweets throughout the United States. On Sunday afternoon, the chief economic advisor for the German multinational financial services company Allianz criticized the Fed on the broadcast CBS’ “Face the Nation.” Mohamed El-Erian says that the description “transitory” was one of the worst calls in the Federal Reserve’s history.

“The characterization of inflation as transitory is probably the worst inflation call in the history of the Federal Reserve, and it results in a high probability of a policy mistake,” El-Erian insisted during his interview. “So, the Fed must quickly, starting this week, regain control of the inflation narrative and regain its own credibility,” the Allianz chief economic advisor said. El-Erian added further:

If it does, then higher inflation expectations will drive the economy.

Critics Denounce the Fed’s Actions Using Terms Like ‘Fraud’ and ‘Bankrupt,’ El-Erian Says the Central Bank Can Still Change Its Course

Sven Henrich, the analyst behind, denounced U.S. president Joe Biden’s recent tweet when the president said he was raising the debt limit. “The United States pays its debt obligations by taking on even more debt,” Henrich tweeted. “[And] when it can’t find enough buyers for its debt, it has the Federal Reserve buy its debt, currently to the tune of over $5.6 trillion. [And] if rates were to go back to 2007 levels the U.S. would be bankrupt.”

Popular finance author Carol Roth also roasted the Fed’s monetary policy decisions on Twitter. “If you were to go into your bank account, digitally increase your balance, and then use that new balance to buy things, it would be called fraud,” Roth said. “When the Federal Reserve does that, it is called monetary policy,” she added. During his CBS interview, El-Erian claimed there’s a chance the U.S. central bank could take the reigns and control the economy. “If they catch up now, if they’re honest about their mistake and take steps now, they can still regain control of it,” El-Erian remarked.

As of now, while the Federal Reserve was discussing rates changes and tapering back quantitative easing measures as a possibility, they have yet to take any action. El-Erian opined that the U.S. central bank should, however, “ease their foot off the accelerator,” instead of tapering at an extremely fast rate. El-Erian stated that rising inflation is not affecting the wealthy as many media pundits claim. Instead, it’s low-income households who are most affected.

“There is the possibility that they may have to raise rates,” El-Erian concluded. “Look, it’s important to stop inflation [from]Inflation can be embedded in the system for two reasons. The first is that you lose your purchasing power and those who are poor the most. A Fed reaction is a Fed overreaction. Then you have a recession. Income losses follow. So, you really want to navigate this process in a timely and orderly way.”

In this story, tags
1982, Allianz, American Public, Bureau of Labor Statistics, Carol Roth, automobiles, consumer price index, CPI, economy, El-Erian, Energy, Fed, Federal Reserve, Food, Housing, inflation, Inflation rising, temporary, jerome powell, Liquidity, Mohamed El-Erian, persistent, political class, Purchasing Power, Sven Henrich, transory, US inflation

What do you think about the recent criticisms toward the U.S. Federal Reserve and Mohamed El-Erian’s statements about the Fed’s ‘transitory’ description of inflation? Please comment below to let us know your thoughts on this topic.

Jamie Redman

Jamie Redman is the News Lead for News. He also lives in Florida and works as a journalist covering financial technology. Redman is an active participant in the cryptocurrency community from 2011. Since 2011, Redman has been an active member of the cryptocurrency community. Redman has contributed more than 4900 articles to News since September 2015. These articles are about today’s disruptive protocols.

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