Allianz Chief Economic Advisor Mohamed El-Erian says the Federal Reserve will have to “decide between two policy mistakes.” One risks triggering a recession and the other could prolong inflation well into 2023. “I think the time has passed for a soft landing,” the economist stressed.
Mohamed El-Erian discusses Inflation and Recession in the U.S. Economy
Economist Mohamed El-Erian discussed where the U.S. economy is headed and the Federal Reserve’s plan to bring inflation under control in an interview with Bloomberg Friday.
El-Erian serves as Chief Economic Advisor to Allianz. Allianz is the corporate parent company of PIMCO. He was also the co-chief investment officer and CEO of PIMCO. He is also the president of Queens’ College, Cambridge University.
He was asked what’s feasible for Federal Reserve Chairman Jerome Powell under the current economic environment. The economist replied that “at best,” it is “what Chair Powell called a ‘softish’ landing, and the ‘ish’ is really important.” He elaborated:
It is too late for soft landings, I believe.
He continued: “We could have done it but that would have implied the Fed moving nine months ago. This should have happened. It didn’t. So, instead of tightening into a growing and dynamic economy, it is tightening into a slowing economy.”
Noting that “it is very difficult to get a soft landing,” the economist stated that “the best you can hope for right now is a soft-ish landing.” However, he said the probability of that happening is “Not as high as [he] would like it to be.”
El-Erian also stated:
There are two possible policy choices that the Fed will have to make. Hit the brakes too hard and risk a recession or tap the brakes in a stop-go pattern … and risk having inflation well into 2023.
Not only is the Allianz economist warning of a possible recession in the U.S., Elon Musk, Tesla CEO, stated last week that either we’re already in a recession (or are on the verge of it). He sees this as a positive thing.
Blackrock, the world’s largest asset manager with nearly $10 trillion under management, similarly said last week:
They can be contacted at [the Fed]If interest rates are raised too often, it could trigger a recession. Runaway inflation is possible if they don’t tighten enough.
What do you think about El-Erian’s comments? Please comment below.
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