Economist Mohamed El-Erian says most inflation “could have been avoided” if the Fed had acted earlier

Economist Mohamed El-Erian said on Sunday that most of the current record high inflation could have been avoided had the Federal Reserve acted earlier and showed humility after incorrectly describing inflation as “temporary”.

El-Erian, Allianz’s chief economic adviser, appeared on CBS’ “Face the Nation” to discuss What is the cause of the current inflation? And where it is likely to go.

“We got here because we got a bunch of stuff,” El-Arian said, citing El-Arian war in ukraineThe Energy Shift, and How the Fed Misjudged Inflation and Decline.

“All of these things have come together and are now fueling everything,” he said. “The price of almost everything is going up and making us feel really insecure.”

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El-Erian said most of the inflation “could have been avoided if early action” had been taken by the Fed, which must now regain its credibility to dampen long-term inflation expectations.

FILE – On May 4, 2021, a file photo of the Federal Reserve Building in Washington is shown. (AP Photo/Patrick Simansky, File) ((AP Photo / Patrick Semansky, File) / Associated Press)

“I was baffled when a year ago a lot of people were confident that inflation was temporary,” he said. “There was a lot we didn’t understand about after COVID Inflated that humility would have been a good idea.”

Al-Arian said that things are still as they are Not going well for the Fed Because he has yet to explain why he got the predictions “too wrong for so long”.

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El-Erian fears that inflation in this current period of “stagflation” – low growth, high inflation – will reach 9%. Call it the darkest picture of what It can lead to stagnation.

He added that his most optimistic forecast is that the Federal Reserve regains control of inflation, resulting in a “soft landing” – meaning that inflation falls without sacrificing growth.

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