El-Erian said on Sunday that the characterization of inflation as transitory is probably the worst inflation call in the history of the Federal Reserve. We apologize, but this video didn't load.
You can see other videos from our team by tapping here. If you refresh your browser, or Transitory'' was the worst inflation call in the Federal Reserve's history, it results in a high probability of a policy mistake, he said. The Fed must quickly regain control of the inflation narrative and regain its credibility, starting this week. It will cause higher inflation expectations that feed off themselves. El-Erian has repeatedly stated that the Fed is underestimating inflation risks as the U.S. economic recovery from last year spandemic shock accelerates price increases for everything from energy and food to consumer items. The Fed can still address the problem if it is honest about its mistakes, according to the chief economic adviser of Allianz. He called on policy makers to relax their foot off the accelerator by reducing the liquidity that they inject and cutting support for the housing market.
If you don't do so, you're in for a few months, which could cause the economy to go into a recession, El-Erian said. The Fed had bought US $80 billion of Treasuries and US $40 billion of mortgage backed securities every month during the epidemic to help stimulate economic activity that was crushed in the initial lock-down and subsequent uneven recovery, but in November announced plans to reduce that by US $15 billion a month. Bank of Canada to keep its inflation target as risks mount.
The Bank of Canada worries that supply chain disruptions will persist, stoking inflation for longer.
Canadians will feel the bite of rising prices even more in the year 2022 Economists saw last week's inflation report which showed the cost of living rising at the fastest pace in nearly 40 years, adding to evidence that the central bank will announce a quickening of that pace at its next meeting this week, setting it up to raise rates from near zero sooner as well. El-Erian said he doesn't believe that the U.S. has passed peak inflation and that consumer price increases will remain near current levels for a few months. El-Erian is a professor at Queens College, Cambridge, and a contributor to Bloomberg.