Allianz chief economic adviser and noted economist Mohamed El-Erian has criticized the U.S. Federal Reserve, saying the central bank made “two big mistakes that may go down in the history books.”
What Happened
“One is mischaracterizing inflation as transitory. By that, they meant it is temporary, it’s reversible, don’t worry about it. That was mistake number one. And then mistake number two, when they finally recognized that inflation was persistent and high. They didn’t act in a meaningful way,” El-Erian told CBS News.On Recession
The economist explained how the Fed’s actions create the risk of recession. “And as a result, we risk mistake number three, which is by not easing the foot off the accelerator last year, they are slamming on the brakes this year, which would tip us into recession,” he said.The economist said the Fed has to not only overcome inflation but restore its credibility. “So, yes, I fear that we risk a very high probability of a damaging recession that was totally avoidable,” he said.
