Recession or Prolonged Inflation: The Fed Must Decide Between Two Policy Mistakes, Says Economist
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 on Inflation, Recession, and 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 is Chief Economic Advisor at Allianz, the corporate parent of PIMCO, one of the largest investment managers, where he was CEO and co-chief investment officer. 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: I think the time has passed for a soft landing.
He continued: “We could have done it but that would have implied the Fed moving nine months ago. It should have. 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 further opined: The Fed is going to have to decide between two policy mistakes. 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.
The Allianz economist is not the only one warning that the U.S. economy could be headed towards a recession. Tesla CEO Elon Musk said last week that we are either already in a recession or approaching it. However, he sees it as a good thing.
Blackrock, the world’s largest asset manager with nearly $10 trillion under management, similarly said last week: If they [the Fed] hike interest rates too much, they risk triggering a recession. If they tighten not enough, the risk becomes runaway inflation. Tags in this story Fed, Fed Chair, fed inflation, fed policy mistakes, fed recession, jerome powell, Mohamed El-Erian, Mohamed El-Erian fed policies, Mohamed El-Erian inflation, Mohamed El-Erian recession, soft landing, softish landing
What do you think about El-Erian’s comments? Let us know in the comments section below. Kevin Helms
A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography. Elon Musk: We"re Approaching a Recession but It"s "Actually a Good Thing" ECONOMICS | 24 hours ago After Defaulting Sri Lanka Plans to Print $2.8 Billion Worth of Rupees, Inflation Rate Expected to Top 40% ECONOMICS | 3 days ago
Image Credits: Shutterstock, Pixabay, Wiki Commons Previous articleProvision Allowing Cryptocurrency Payments in Foreign Trade Added to Russian Bill Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article. Read disclaimerShow comments More Popular NewsIn Case You Missed ItCentral Bank of Brazil Confirms It Will Run a Pilot Test for Its CBDC This Year
The Central Bank of Brazil has confirmed that the institution will run a pilot test regarding the implementation of its proposed central bank digital currency (CBDC), the digital real. Roberto Campos Neto, president of the bank, also stated that this ... read more.NFT Sales Volume Saw a Small Uptick This Week — Moonbirds, Mutant Apes Take Top Sales UAE Airliner Emirates to Launch NFTs and Experiences in the Metaverse Goldman Predicts US Recession Odds at 35% in 2 Years, John Mauldin Wouldn"t Be Surprised if Stocks Fell 40% Microbt Reveals Latest Bitcoin Mining Rigs — Machines Produce up to 126 TH/s With Custom 5nm Chip Design