- Dr. Mohamed El-Erian, President of Queen's College in Cambridge and columnist for Bloomberg, believes that the US Federal Reserve's delay in cutting interest rates in an attempt to calm inflation may lead to the risk of falling behind.
- Al-Araban said, in an interview with Bloomberg TV, “The Federal Reserve’s direction has shifted based on the data, which is considered the opposite of the shift they made in December, and now they have to change direction.”
- He added, “While monetary policy officials are working to change direction and intend to keep interest rates high for a longer period, the market is moving in the other direction.”
- “The Fed will have to change direction, not based on inflation numbers, but based on the real economy,” he continued.
- Like other market watchers, El-Erian has previously raised the possibility that the US central bank will look beyond its 2% inflation target into a new era of structurally higher pressures on price growth.
- Al-Erian said: “Is the inflation target the right target? We are all talking about the desire for the price growth rate to return to 2%.” “This number is completely arbitrary, and if we are aiming for the wrong inflation target, the risk of making a mistake – one that means sacrificing growth unnecessarily – is high.”
- He added: “The world is exposed to high inflation rates. “We came from an environment that was exposed to lower inflation rates.”
- Treasuries rose last Wednesday after consumer price data showed headline inflation slowed in April, with investors boosting their bets that the Federal Reserve will cut rates a quarter-point twice by December, but inflation reports also made clear that in some areas of the service economy, it has become difficult to... Taming price growth.
