Erian Calls on the Fed to Immediately Change its Inflationary Tone

Allianz Chief Economic Advisor Mohamed El-Erian criticized Fed Chairman Powell in a public interview that the price increase was only a short-term phenomenon. Argument, and stated that the Fed needs to act quickly to redefine its argument on inflation.

These remarks coincided with the Fed’s final interest rate resolution meeting of the year to be held this week. In the early morning of December 16, Beijing time, the Fed will announce the December interest rate resolution and hold a press conference. The market is highly concerned about the Fed’s inflationary arguments and future policy path signals.

  Erian said: “The Fed characterizes inflation as temporary. This may be the worst inflation forecast in the history of the Fed.”

“This leads to a high probability of policy errors,” he said. “Therefore, starting this week, the Fed must quickly regain control over inflation and regain its credibility. Otherwise, it will become a high pass (183.88, 1.62, 0.89). %) The driving force of inflation expectations, and inflation expectations will be self-propelled.”

Elian has repeatedly stated that the Fed still underestimates the risk of inflation as the U.S. economy has recovered from the impact of last year’s epidemic and the prices of all commodities, from energy, food to consumer goods, have accelerated.

He said that if the Fed now honestly admits to earlier mistakes, it can still solve the inflation problem.

He once again called on the Fed’s policymakers to reduce the injection of liquidity and reduce support for the real estate market. If the Fed does not do this, it may need to “slam on the brakes” in the next few months, which may cause the economy to fall into recession.

 During the epidemic, the Federal Reserve is purchasing US$80 billion in Treasury bonds and US$40 billion in mortgage-backed securities every month to stimulate the US economic recovery. Although the US economy has been recovering for a period of time and inflation has gradually risen, it was not until November that the Fed had just announced the Taper plan to reduce the size of its debt purchases by $15 billion per month.

Economists believe that the cost of living of the American people is rising at the fastest rate in nearly 40 years, which further shows that the Fed may begin to hint that it will speed up policy tightening and may start raising interest rates sooner.

Although the Fed has activated Taper, Elian believes that US inflation has not yet passed its peak, and consumer prices will continue to rise at a rate close to the current level in the next few months.

 

Reviewer overview

Erian Calls on the Fed to Immediately Change its Inflationary Tone - /10

Summary

Allianz Chief Economic Advisor Mohamed El-Erian criticized Fed Chairman Powell in a public interview that the price increase was only a short-term phenomenon. Argument, and stated that the Fed needs to act quickly to redefine its argument on inflation.

0 Bad!