Mohamed El-Erian, Allianz Chief Economic Advisor, says that the Federal Reserve must “decide between two policy errors.” One could trigger a recession while the other could prolong the rise in inflation well into 2023. The economist stated that he believes the time is past for a soft landing.
Mohamed El-Erian: Inflation, Recession and the U.S. Economy
In an interview with Bloomberg Friday, Mohamed El-Erian, economist, discussed the direction of the U.S. economy and the Federal Reserve’s plans to control inflation.
El-Erian, who is the Chief Economic Advisor at Allianz (the corporate parent of PIMCO), is a co-chief investment officer and was also the CEO of PIMCO. El-Erian is also president of Queens College, Cambridge University.
When asked about the economic situation, he replied that it was “at best” for Federal Reserve Chairman Jerome Powell. He said that it was “at best” a “softish landing, which Chair Powell described as a “softish”, and that the “ish” is really important.
It is too late for a soft landing, I believe.
He said, “We could have done that but that would have required the Fed to move nine months ago.” It should have. It didn’t. Instead of growing into a dynamic and growing economy, it is becoming a slower economy.
The economist noted that it was very difficult to achieve a soft landing. However, he stated that the likelihood of that actually happening is “Not as high [he] would prefer it to be.”
El-Erian also stated:
The Fed will have to choose between two policy errors. You can either hit the brakes too hard to risk a recession, or you can tap the brakes in an accelerating pattern and risk inflation well into 2023.
Not only is the Allianz economist warning that the U.S. could be heading towards a recession, but so are many others. Elon Musk, Tesla CEO, stated last week that the U.S. economy is either in recession already or on the verge of it. He sees it as a positive.
Blackrock, the largest asset manager in the world, has nearly $10 trillion under its management.
They risk triggering recession if they raise interest rates too high. Runaway inflation is possible if they don’t tighten enough.
